We are not on the way to a double-dip recession, as some feared,” assured Ken Simonson on May 3. He cited statistics supporting three successive quarters of economic expansion in America. “The growth should be continuous for the rest of the year.”

The good report about the general economy was the most positive news delivered by the chief national economist of the Associated General Contractors of America. Unfortunately, for Michigan contractors he doesn’t see much –  if any – nonresidential market advancement this year. His belief is expansion will wait until 2011. Even then it will probably be modest.

He spoke at an afternoon gathering of AGC of Michigan members at the Birmingham office of Clark Hill. Much of his talk focused on national trends, which now appear to be benefiting from the federal economic stimulus adopted last year. But Michigan, as much of the rest of the country, is still being restrained by a combination of tight credit, high vacancy rates, and a long depressed market that has dropped business through the economic floor. Highly aggressive competition remains, fighting over the scraps.

“Contractors are beating themselves up, just to pick up work and stay afloat,” Simonson said. Profit margins have nearly disappeared. He expects the situation is bound to change, however. If it doesn’t soon, increasing numbers of contractors will be driven into bankruptcy.

Over the coming years government and institutional construction, such as K-12 public education, can be expected to lag due to still falling property values and reduced tax revenues. While the nation’s bond market has recovered, credit lines for construction have been virtually shut down over the past 18 months.

Hotel development has collapsed, as has most office construction. Retail construction has been severely constrained. In most states industrial construction has not recovered to pre-recession levels. There’s a big question mark about what’s going to happen when the economic stimulus expires. Yet, ironically, single home construction – whose bursting bubble has been blamed for many of our nation’s prevailing economic ills – is showing signs of a recovery.

The reason for home building’s return reflects a combination of positive factors. The oft-cited $8,000 home-buyer tax credit has played a role, although that program is now phasing out. Yet even without the credit, the cost of housing has fallen so much that, in many instances, buying a home is cheaper than renting one. In addition, Simonson pointed out, there’s still considerable pent-up demand for new, single-family housing. It’s starting to come out of the woodwork.

Nonresidential construction wage demands have been falling in response to rising unemployment among the skilled trades. For 2010 Simonson predicted wage increases will average about two percent. He said total construction spending this year might decline as much as four percent or increase as much as two percent, depending on factors beyond an economist’s control. In 2011 the numbers are expected to be rosier, with total construction spending to see a gain of three percent to seven percent.

One hard-to-predict variable remains the cost of materials. In the past some of them, such as copper, structural steel, drywall, and lumber, have been subject to quick spikes in price. The recession, and its reduction in demand, has dropped prices to more reasonable levels. But a surge in global development could bring the price spikes back.

“Project owners need to know that our industry depends on specific materials that are in demand worldwide, suffer from erratic supply growth, and are heavy or hard to transport,” Simonson said. “They should understand that we are subject to price spurts, transportation bottlenecks, and fuel price swings. Thus we need to allow for producer price index increases of from six percent to eight percent, when it comes to building materials, especially after 2010.”