AGC forecast shows poor economic picture

By Alex Dahm13 January 2009

An estimated two-thirds of non-residential construction companies in the US are planning to cut their payrolls, according to employment and business forecast figures released in January by the Associated General Contractors of America. The forecast is a 30% decline in the number of people working on construction projects.

"Unless the business climate changes significantly and soon, the construction sector will continue to experience the kind of devastating job losses and crippling declines in business activity that will undermine efforts to end the recession," said Stephen Sandherr, AGC CEO.

The forecasts, based on a representative survey conducted by the construction association late in 2008, found no relief in sight for construction companies that already have been among the hardest hit by the economic slowdown. Many construction companies experienced significant slowdowns beginning late last year, resulting in a 10% decline in the number of construction workers since 2006, Sandherr said.

According to AGC its member companies have seen or are planning for declining activity in every type of construction market. Ninety-two percent of building contractors and 93% of road builders are expecting or experiencing declining activity. More than 83% of utility contractors are bracing for declines while 77% of water resource contractors are expecting a decline in business building levees or locks.

The forecast found, however, that planned investments in infrastructure as part of the stimulus package is likely to dramatically improve the employment and business outlook for the year. An example is that 85% of non-residential construction companies will cancel layoffs or add new employees if states embarked on stimulus-funded infrastructure projects.

According to the forecast, construction companies would increase their payrolls by 25% if the stimulus included new infrastructure investments. Construction companies said that they would invest an average of $500,000 this year in new equipment if they received new work as part of the stimulus package.

"With a stimulus, construction companies can get more people to work and more money into the economy in a way that will immediately boost our economy," Sandherr said. "Without a stimulus, construction companies will cut jobs, slash spending and continue to be among the hardest hit sectors within our economy."

Sandherr noted that the association was working to find ways to improve the business environment for the construction community. He said builders across the US were urging Congress to include infrastructure investments in the stimulus, and that the association was calling for US$2.2 billion to help renovate hundreds of federal facilities and for additional funds to repair crumbling schools.

He noted that the association was working with building, design and labour groups to call today for new tax incentives to encourage conversion to energy efficient buildings, construction of renewable energy facilities, remediation of brownfield sites and construction of new airport and commercial projects.

Sandherr added that the groups were proposing the creation of "economic crisis zones" that would, similar to natural disaster zones, provide tax exemptions and private activity bonding authority to finance construction projects in communities experiencing two consecutive months of double-digit unemployment.

"We are doing everything imaginable to ensure that our construction employment and business forecast does not become a reality," Sandherr said.

Full results of the survey are at:

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