Half a world away, barefoot jute farmers in Bangladesh suffer because of America's housing recession.
The jute, which brings in 65 percent of Bangladesh's badly needed foreign exchange, ends up as carpet backing in eight of 10 new homes built in America. With housing starts severely depressed, no Bangladesh jute was shipped to the United States from November 1981 until last February, as 40,000 rolls of carpet backing piled up on the docks of Savannah, Ga.
While Bangladesh lost its major source of hard currency, needed to lift it from its rank as one of the poorest nations, carpet weavers in Dalton, Ga., found themselves out of work--part of the spreading ripples from America's housing recession.
According to the Department of Commerce, 1982 was the worst year for America's carpet industry since 1973, because the severe decline in housing starts was compounded by the downslide in the production of new cars, which also require carpets.
Production dropped almost 15 percent below a depressed 1981 level. And carpet mills, operating at about 60 percent of capacity, slowed to three- or four-day work weeks.
Work should pick up this year if housing starts continue rising as predicted, bouncing back from what the National Association of Home Builders called "the longest running and most devastating" recession since World War II.
"Although housing activity remains low," the NAHB said, "a comparison between the fourth quarter of 1981 and estimates for the same period of 1982 indicate the worst is over."
The builders' association reported more than 300,000 housing starts in the fourth quarter of 1982, an increase of 42 percent over the same period in 1981, when economists now believe the housing recession bottomed out. The NAHB predicts housing starts will increase 27 percent this year, up to 1.35 million from 1.06 million in 1982. The Commerce Department is less optimistic, predicting only a 20 percent increase.
All this assumes a continued decline in interest rates for home mortages, which have come down from as high as 18 percent at one point in 1982 to between 12.8 and 14.5 percent for conventional mortgages and 12 percent for FHA (Federal Housing Administration) notes. The NAHB estimates FHA mortgage rates will bottom out this year at about 10 1/2 percent.
The expected increase in new construction should spread through dozens of U.S. industries that have been badly hit by the decrease in housing starts.
The NAHB estimates the housing recession has cost the economy $223 billion over the past three years, while the National Association of Realtors places the toll slightly higher, at $242.2 billion. Job losses, listed by the home builders at 2.8 million, spread through a myriad of workers--from builders, movers and hardware merchants to mortgage bankers, real estate brokers and title attorneys.
The construction industry was especially hard hit. The home builders said the unemployment rate in the industry jumped to 21.9 percent last November, approaching twice the national rate, from 17.8 percent a year earlier. More than 1.1 million construction workers--one in 10 of all unemployed Americans--are out of work, compared with 916,000 a year ago.
The upward movement of housing starts in the last quarter of 1982 has now begun to trim the ranks of the unemployed.
The lumber industry is also reeling under the housing slump, with more than 60,000 softwood lumber and plywood industry workers off the job or on reduced schedules, according to the National Forest Products Association. Home building accounts for half the softwood lumber produced in the United States.
Commerce Department figures show that U.S. lumber consumption last year dropped to 34 billion board feet, its lowest level in decades.
As a result of the slowdown in demand, softwood lumber prices in mid-August were 19 percent below those of a year earlier and 46 percent under 1979 levels.
Prices now appear to be rebounding with the pickup in demand for lumber that accompanied the recent upturn in housing starts.
The production of wooden kitchen cabinets and bathroom vanities also dropped with the decline in housing starts, down 13 percent from last year and 26 percent from their 1979 peak. "Wood cabinets," said the Commerce Department, "are an integral part of new residential construction and a focal point of much new housing and remodeling activity."
The same trend holds true for bricks; 60 percent of the bricks produced in America go into new homes. Production amounted to 4.7 billion bricks last year--the smallest amount since 1947--compared with 5.1 billion a year earlier and 8.7 billion in 1978, the peak year.
Sales of furniture and heavy appliances also declined. Both industries are expected to improve this year if the anticipated upturn in the construction of new homes materializes.
The Commerce Department said sales of heavy appliances, such as stoves, refrigerators, washer-dryers and washing machines, are closely linked to the construction of new homes. In 1977, for instance, new homes accounted for 35 percent of the 5.7 million refrigerators sold, while last year 22 percent of the 4.4 million refigerators sold went into new homes.
Between 1977 and last year, refrigerator sales for new homes declined from 2 million to 1 million, while sales of replacement refrigerators dropped only 250,000--from 3.67 million to 3.42 million.
Sales of new appliances last year, amounting to $12.2 billion, declined 10.2 percent from 1981.
Furniture sales continued on a downward slide in 1982 for the third straight year, partially because fewer Americans bought new homes they had to furnish. Orders last year totaled $1.7 billion, but many of the sales were at reduced prices to shrink inventories. Adjusted by the Commerce Department for the price changes, the amount of furniture sales declined 11 percent last year on top of declines of 1 percent in 1981 and 5 percent in 1980.
The Commerce Department estimated furniture industry employment last year at 294,000, down 5 percent from 1981 and 7 percent from 1979.