Published in the ‘New York Times,’ Sheila Dewan’s article “Signs of life in home building” presents an analysis of the current situation in the housing and employment sectors in New York. According to Dewan (2014), the employment sector and housing industry have a natural and strong relationship in a perfect economy. The link is a virtuous cycle in which the housing industry drives the job market, and the job market drives the housing industry.
The article reports that the New York construction sector has created over 48,000 employment opportunities since 2012. Also, the residential sector has also employed more than 200,000 people within the same period.
Therefore, the writer argues that this is a sign of a fast recovery, an enhanced growth, and a good future for the economy. Arguably, New York’s housing and employment sectors provide a good example of an economic trend, which suggests that the state’s economy has a better future.
In a perfect market, housing and employment sectors are under the influence of underlying economic principles. In analyzing Dewan’s article, several economic theories and principles are necessary. The article reports that the demand for housing has risen significantly over the last four years. For instance, the demand is high among the people aged between 25 and 34 years, especially the employed group.
Secondly, companies in the construction sector have experienced a sharp rise in earnings. For instance, the article reports that D.R Horton recorded 86% rise in quarterly earnings, which suggests that the city’s employment rate is on the rise. How true is this finding in economic terms?
According to the principles of economics, the rise in the housing sector, a basic need, is influenced by the people’s purchasing power. The people’s purchasing power is limited, which means that housing is a scarce facility. For an economy to enjoy a high rate of growth in the housing sector, it is necessary that a majority of people have better sources of income, mostly though employment.
A rise in the rate of employment and income corresponds to a rise in the people’s purchasing power, which in turn increases the ability to purchase houses (O’Sullivan, Sheffrin & Perez, 2013). This is the case in New York, indicating a rise in the rate of employment, income, and people’s purchasing power.
The elasticity of demand and supply is applicable in this case. Theoretically, elasticity determines the change in the value worth of a variable by 1% due to a change in the value of another variable. Housing is a very price-sensitive variable (Mankiw, 2012).
A unit fall in the price of the house increases its demand by a large margin. Also, housing is a relative demand-sensitive product. For instance, in New York, the increase in people’s purchasing power, which is enhanced by the end of the recent economic crisis, has prompted people to buy houses to satisfy their desires to own a home.
Therefore, Dewan’s article indicates that people’s purchasing power is on the rise in New York. Consequently, it shows that the elasticity of demand and supply in the housing sector is dynamic, as determined by a surge in an increase in the number of people purchasing houses and the number of companies investing in the construction sector.
The article also indicates that competition for the booming housing market is relatively high. In economics, it is theoretically evident that the increase in the demand for houses will result in a significant increase in the number of companies competing in the market. Nevertheless, the high capital involved in the sector is likely to keep some companies out of the New York market.
I tend to agree with Dewan’s article because it reflects practical applicability of economic principles in the real world. For instance, the sharp increase in the profitability levels for construction corporations indicates a significant rise in demand for the units. Consequently, it is an indication that the rate of employment, as well as the net worth of the dollar, has increased over the last four years.
References
Dewan, S. (2014). Signs of life in home building. The New York Times, p. A12.
Mankiw, N. (2012). Principles of Economics. New York: Cengage Learning.
O’Sullivan, A., Sheffrin, S., & Perez, S. (2013). Survey of economics: Principles, applications and tools. Upper Saddle River, NJ: Pearson-Prentice Hall.