People are moving back home with their parents after finishing school or moving in with their sister after a divorce instead of getting their own place. People are even getting divorced less. Looked at in one light, this can be seen in an optimistic way. People aren’t forming new households and buying homes because the economy’s so bad. But if more homes were being built, that would employ people and improve the economy. So given the continued growth in the national population, sooner or later construction employment will tick up. That, in turn, could provoke a virtuous circle of homebuilding and construction employment.
Alternatively, you might just wonder if something screwy isn’t happening here. This seems to me a bit like one of Keynes’ state of long-term expectation problems. It’s possible that we would benefit from some kind of federal “let’s build houses again” policy initiative if only as a coordinating devise. But in a more restrained way, I’d say this helps illustrate how all the state and local government budget cuts hurt the whole economy. Laid off teachers and firefighters contribute to this drag on net household formation, which increases private sector unemployment.