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Wednesday, April 27, 2011
"Construction Sloooowly Increases"
The lead paragraph in many national news stories about the country’s economic trends are starting to paint much rosier pictures. But as we continue to read toward the point of the stories’ inverted pyramid, it becomes clear that those three words should appear in the lead.
Raymond James’ almost-giddy April 4-8 Market Commentary is a perfect example:
“Happy days are here again….The job market is now adding jobs at a pace stronger than population growth…. It’s been clear for some time that large-scale job losses are far behind us….Small and medium-size firms have begun to add jobs in recent months….”
The fact is the recession that ended for everyone else nearly two years ago continues to plague the construction industry. Employment rolls remain down; spending for building projects is slow. The construction industry stands at a seasonally adjusted 5,514,000 – about 29 percent lower than it was in April 2006. Just as sad, today’s construction workforce is identical to what it was six months ago. It has been left at the terminal while the rest of the economy takes off on a solid recovery.
The industry’s unemployment rate stands at 20 percent, more than double the overall rate.
“The ongoing drop in construction employment in March, combined with the news that construction spending hit an 11-year low in February, is doubly distressing,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Despite a few signs of an upturn, the industry as a whole has yet to touch bottom five full years after the peak in employment and spending.”
Even the few bright spots for construction, as highlighted in economic reports, come with asterisks. Private commercial construction spending increased 0.9 percent in February, according to a report by the U.S. Census Bureau. That’s welcome news, concedes Anirban Basu, chief economist for the Associated Builders and Contractors. He says the report confirms the beginning of a transition period in the industry from public – especially stimulus package-generated – projects to more private building. But ABC notes the February uptick does little to offset the prolonged downturn. Private nonresidential construction spending is down 13.2 percent in the last 12 months. And total nonresidential construction spending – public and private – is down 6.3 percent for the trailing 12 months. Private building simply is not picking up the slack as federal, state and local government investment in construction dries up.
“As the impact of federal stimulus wanes, and the broader economy continues to recover at a respectable clip, the volume of privately financed construction is now edging higher,” Basu said. “However, for the time being, that slender growth is being more than offset by decreases in publicly financed construction. This pattern is likely to continue into the summer. Demand for privately financed construction will probably expand only gradually due to an excess supply of hotel rooms, office space, retail space and industrial space in many markets. In contrast, the recent decline of construction activity in segments heavily financed by state and local governments will likely continue on that path.”
A combination of intense public construction and policies to stimulate private construction are required to persuade owners hesitant to pull the string on new projects. Here are some suggestions. On the public front:
• Eliminate Davis Bacon on public construction projects thus giving local and state government more bang for their buck in this tight government receipts environment.
• Remove restrictions and limitations on public-private partnerships that would allow construction of optional toll roads and other projects which require little initial outlay of public money.
• Expedite approval processes, environmental impact reviews, licensing, inspections and other red tape to fast track crucial infrastructure projects. While we’re at it, let’s revoke any legislation that requires consideration of project labor agreements.
Getting the private sector building again is the key to a real recovery, however. To jumpstart this vital component to the nation’s good health, we must create private-sector jobs and get money flowing by boosting demand for real estate, manufactured goods, services, travel, etc. Several steps can start us in the right direction:
• Knock down barriers to foreign trade, thereby reducing the cost of imported materials and opening overseas markets to American goods. This will create demand for manufacturing facilities, transportation centers, ports, etc.
• Free up the money supply by not raising taxes, returning retention monies withheld from contractors.
AGC’s “Building a Stronger Future” calls for several of these initiatives, and notes their many benefits: 1. An increase in construction activity will create many new jobs in communities large and small; 2. New construction will increase demand for manufactured goods while boosting global competitiveness. 3. Improved public infrastructure and private buildings will make U.S. businesses more competitive, more efficient and more successful, boosting employment, the economy and overall tax revenue.
The lead paragraph in many national news stories about the country’s economic trends are starting to paint much rosier pictures. But as we continue to read toward the point of the stories’ inverted pyramid, it becomes clear that those three words should appear in the lead.
Raymond James’ almost-giddy April 4-8 Market Commentary is a perfect example:
“Happy days are here again….The job market is now adding jobs at a pace stronger than population growth…. It’s been clear for some time that large-scale job losses are far behind us….Small and medium-size firms have begun to add jobs in recent months….”
The fact is the recession that ended for everyone else nearly two years ago continues to plague the construction industry. Employment rolls remain down; spending for building projects is slow. The construction industry stands at a seasonally adjusted 5,514,000 – about 29 percent lower than it was in April 2006. Just as sad, today’s construction workforce is identical to what it was six months ago. It has been left at the terminal while the rest of the economy takes off on a solid recovery.
The industry’s unemployment rate stands at 20 percent, more than double the overall rate.
“The ongoing drop in construction employment in March, combined with the news that construction spending hit an 11-year low in February, is doubly distressing,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Despite a few signs of an upturn, the industry as a whole has yet to touch bottom five full years after the peak in employment and spending.”
Even the few bright spots for construction, as highlighted in economic reports, come with asterisks. Private commercial construction spending increased 0.9 percent in February, according to a report by the U.S. Census Bureau. That’s welcome news, concedes Anirban Basu, chief economist for the Associated Builders and Contractors. He says the report confirms the beginning of a transition period in the industry from public – especially stimulus package-generated – projects to more private building. But ABC notes the February uptick does little to offset the prolonged downturn. Private nonresidential construction spending is down 13.2 percent in the last 12 months. And total nonresidential construction spending – public and private – is down 6.3 percent for the trailing 12 months. Private building simply is not picking up the slack as federal, state and local government investment in construction dries up.
“As the impact of federal stimulus wanes, and the broader economy continues to recover at a respectable clip, the volume of privately financed construction is now edging higher,” Basu said. “However, for the time being, that slender growth is being more than offset by decreases in publicly financed construction. This pattern is likely to continue into the summer. Demand for privately financed construction will probably expand only gradually due to an excess supply of hotel rooms, office space, retail space and industrial space in many markets. In contrast, the recent decline of construction activity in segments heavily financed by state and local governments will likely continue on that path.”
A combination of intense public construction and policies to stimulate private construction are required to persuade owners hesitant to pull the string on new projects. Here are some suggestions. On the public front:
• Eliminate Davis Bacon on public construction projects thus giving local and state government more bang for their buck in this tight government receipts environment.
• Remove restrictions and limitations on public-private partnerships that would allow construction of optional toll roads and other projects which require little initial outlay of public money.
• Expedite approval processes, environmental impact reviews, licensing, inspections and other red tape to fast track crucial infrastructure projects. While we’re at it, let’s revoke any legislation that requires consideration of project labor agreements.
Getting the private sector building again is the key to a real recovery, however. To jumpstart this vital component to the nation’s good health, we must create private-sector jobs and get money flowing by boosting demand for real estate, manufactured goods, services, travel, etc. Several steps can start us in the right direction:
• Knock down barriers to foreign trade, thereby reducing the cost of imported materials and opening overseas markets to American goods. This will create demand for manufacturing facilities, transportation centers, ports, etc.
• Free up the money supply by not raising taxes, returning retention monies withheld from contractors.
AGC’s “Building a Stronger Future” calls for several of these initiatives, and notes their many benefits: 1. An increase in construction activity will create many new jobs in communities large and small; 2. New construction will increase demand for manufactured goods while boosting global competitiveness. 3. Improved public infrastructure and private buildings will make U.S. businesses more competitive, more efficient and more successful, boosting employment, the economy and overall tax revenue.
Labels: Commercial, Construction Industry, Industrial
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