The Building Tradesman Newspaper

Friday, January 25, 2013

Survey predicts better year for U.S. construction

By The Building Tradesman

A ‘generally optimistic’ outlook for U.S. construction in 2013 as a whole is tempered by some foreboding survey results of Michigan-specific contractors.

Significantly more construction firms are planning to add new staff than plan to cut staff while demand for many types of private sector construction projects should increase this year, according to survey results released Jan. 14 by the Associated General Contractors of America and Computer Guidance Corporation. The survey, conducted as part of Tentative Signs of a Recovery: The 2013 Construction Industry Hiring and Business Outlook, points to some good news for the year even as firms worry about rising costs and declining public sector demand for construction.

“While the outlook for the construction industry appears to be heading in the right direction for 2013, many firms are still grappling with significant economic headwinds,” said Stephen E. Sandherr, the association's chief executive officer. “With luck and a lot of work, the hard-hit construction industry should be larger, healthier, more technologically savvy and more profitable by the end of 2013 than it is today.”

The survey, released Jan. 14, said that 31 percent of U.S. construction firms plan to add staff in 2013, while only 9 percent plan to make layoffs. However, “the scope of those staff additions are likely to be modest,” the report said, with 79 percent of firms reporting they plan to hire 15 or fewer people in 2013 and only 13 percent planning to hire more than 25 new workers this year.

And then there’s Michigan: 37 percent of construction firms in our state plan layoffs for this year, the highest percentage among the states, and four times the national average.

At the top of the list, no firms working in Maryland reported plans to make layoffs this year.

Conversely, 21 percent of construction firms in Michigan plan to add workers, and 16 percent forecast “no change” in hiring.

The survey is among 30 states with large enough survey sample sizes.

Contractors appear increasingly optimistic that demand for certain private sector projects will expand this year. Firms are most optimistic about the outlook for hospital and higher education construction, with 36 percent of firms predicting the amount of money spent on those projects will grow in 2013 while 39 percent of firms expect the market will remain stable compared to last year. Contractors were also optimistic about the markets for power construction, but had lower expectations for manufacturing; private office and retail, warehouse and lodging construction.

Meanwhile, contractors expect demand for many types of public construction will decline in 2013. For example, 40 percent of contractors report they expect demand for public buildings to shrink in 2013 while only 18 percent expect that market to grow. Another 37 percent of contractors report they expect demand for K-12 school construction to shrink while only 20 percent expect it to increase. And 35 percent of contractors expect the market for manufacturing facilities to shrink this year, while only 23 percent predict it will expand.

A significant – but smaller than last year – number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions.

“Unfortunately, there are almost as many causes for concern as there are signs of optimism,” said Ken Simonson, the association's chief economist. “Demand for public buildings is set to decline, manufacturing work appears to be slackening, materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”