The speaker’s assertion, ‘For the past century, an increase in the number of residential building permits issued per month in a particular region has been a reliable indicator of coming improvements to that economy’, is loosely supported by historical evidence. The speaker points to a century of statistical data and asserts that the empirical evidence demonstrates a correlation between increasing permits and rising employment and production

The speaker may have ascribed a causal relationship between rising permits and rising employment. However, many factors can cause an increase in permits to be followed by higher employment, both regionally and nationally. For instance, if a local economy had a shortage of labor, an influx of new workers would boost employment. Likewise, if a local economy had an abundance of labor, an increase in permits would not necessarily lead to higher employment. Moreover, permits issued may be an indication of either a change in demand or a change in supply, and both can lead to increased employment. For example, if the construction industry was contracting, then fewer permits would be issued, but if contractors started building again, the number of permits issued would similarly rise. However, an increase in the number of permits issued would not necessarily mean an increase in the number of jobs created, since permits are typically issued to multiple businesses, which may result in more work being done by fewer people

Another factor to bear in mind is that permits may be issued for construction projects that, while beneficial to the economy, are not permanent. For instance, new buildings may be constructed for temporary events such as trade conventions. Thus, while permits for construction may initially increase, these permits may not result in permanent employment. Likewise, if permits are issued for various types of housing construction, such as multi-family, these permits may not result in permanent employment. Therefore, an increase in permits issued may not actually result in increased employment

The speaker also implies that an increase in permits issued will directly lead to increased production. However, permits may also be issued to build more factories, offices, or retail spaces, and these permits result in increased production. However, if permits are not issued for new factories or offices, then these new factories, offices, or retail spaces will not occur, so permits may not result in increased production. Moreover, permits for non-residential construction do not necessarily result in increased production, either, since permits may be issued for work that increases productivity but does not result in increased output, such as construction that increases the efficiency of existing production

The speaker’s assertion is also flawed because it fails to take into account other factors that may lead to unemployment, such as changes in technology. If robotics or mechanical automation replaces workers, then increases in permits may not result in higher employment. For example, if a factory or office building is automated, then fewer workers are needed to perform the same work, so the number of permits issued may not increase. Similarly, if new technology allows workers to perform their jobs in different locations, then the number of permits issued may not increase. Moreover, technological changes may affect demand for certain types of jobs, such as factory workers, but lead to increased demand for other types of jobs, such as office workers. Therefore, increases in permits issued may not result in higher employment

Finally, the speaker’s assertion omits important variables in the historical data that mask the causal relationship between permits and unemployment. For example, permits do not always build housing in the same locations where workers live. Therefore, a decrease in permits in an area may result in higher unemployment because workers cannot find housing. Similarly, permits may be issued for new construction in areas that are economically depressed, resulting in higher unemployment. Furthermore, permits may be issued when local economies are booming, and as the economy declines, the number of permits issued may decrease. Therefore, increases in the number of permits issued may not result in higher employment

If the speaker’s assertion is sound, then building permits would be a valuable indicator of economic improvement. However, other factors may explain the increase in permits. For instance, increased numbers of permits may be the result of increased construction activity that has more to do with local conditions than local economic conditions. Therefore, increased permits may not be a reliable predictor of economic conditions, and the speaker’s argument is not well supported.