The Building Tradesman Newspaper

Friday, June 11, 2010

‘Fragile’ construction seeks to gain some footing

By The Building Tradesman



Construction analysts predicted a see-saw ride for the industry as it emerges from the Great Recession, and that’s just what we’re getting.

On June 1, the Associated General Contractors of America, citing federal numbers, reported that U.S. construction spending “rebounded strongly” in April, increasing 2.7 percent or $23 billion compared to March. The increase was the largest month-to-month increase in U.S. construction activity in 10 years, fueled by private residential construction (up 4.4 percent), public construction (up 2.4 percent), and private nonresidential (up 1.7 percent).

Then came June 4, when the release of more federal numbers prompted the AGC to report that construction employment declined in May as 35,000 workers lost jobs, offsetting most of the increases the industry experienced in March and April. The construction unemployment rate actually declined from 21.7 percent to 20.1 percent during that time period, but that percentage isn’t seasonally adjusted.

The figures, said the AGC, “show how fragile the sector is despite recent increases in stimulus funding activity.”

“Growing stimulus activity was clearly offset by weak private sector demand and diminished state and local construction budgets last month,” said Ken Simonson, the AGC’s chief economist. “Unfortunately, construction employment is likely to remain both relatively low and unstable until at least early 2011.”

Nonresidential construction employment was particularly hard hit in May, accounting for 28,100, or more than four out of five, of the jobs lost in construction last month. Citing construction spending figures released earlier this month, association officials noted that developer-financed construction investments, including office, retail and multi-family residential, are down significantly this year.

Given high vacancy rates, private sector construction demand is likely to remain weak for many more months, association officials noted, adding that state and local construction demand would remain soft for even longer considering the budget shortfalls for most state and municipal governments. They urged Congress and the Administration to take advantage of low construction costs by acting on long-stalled infrastructure bills, such as the six-year surface transportation legislation.

“With the temporary stimulus already starting to run its course, it is time for federal officials to act on the longer term infrastructure programs that will give construction workers a change to make it through the protracted construction downturn,” said Stephen Sandherr, the association’s chief executive officer. “With construction prices low, now is the perfect time for Washington to modernize the nation’s aging transportation, water, and building infrastructure.”

With more than 1.7 million construction workers unemployed, the industry’s unemployment rate is more than double the national rate and was the highest May rate since comparable figures began to be taken in 1976.