Workers Wanted?

January was not a promising start to an optimistic 2011. The construction unemployment rate jumped to a whopping 22.5 percent for the first month of the year, according to federal employment data. While harsh winter weather likely contributed to some of the industry layoffs, construction has lost 130,000 jobs over the past 12 months — twice the overall rate of national unemployment. How long can this downward spiral possibly continue?

According to the Associated General Contractors of America (AGC) and Navigant (its consulting expert), more construction firms are planning to hire workers this year than are planning to make layoffs. It’s the big results of an industry-wide survey released in February by AGC and Navigant. The survey, conducted as part of the Construction Industry Hiring and Business Outlook, shows the industry may finally be emerging from a severe downturn that has left millions of skilled workers unemployed.

“This won’t be an easy year for most firms, but it will be better than last year,” said Stephen E. Sandherr, AGC CEO. “If current trends continue, this industry will be in a much better position 12 months from now than it is today.”

Sandherr noted that while 55 percent of firms laid off staff and only 20 percent of firms added employees in

2010, the outlook is more positive for 2011. He said that 27 percent of construction firms report they plan to add staff in 2011, while only 20 percent report planned layoffs. Even more positive, expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

Among the 26 states with large enough survey sample sizes, 45 percent of firms in Iowa plan to hire, more than in any other state. Those firms plan to hire an average of five employees each, 21 percent of their workforce. Only 5 percent of Iowa firms plan layoffs. Meanwhile, 48 percent of firms in Idaho plan layoffs for this year, the highest percentage of any state. Those firms plan to lay off an average of 12 employees each, 11 percent of their workforce. Only 14 percent of Idaho firms plan to hire.

Despite the improving employment outlook, more contractors expect the construction market to shrink in 2011 than expect it to grow. Contractors are most pessimistic about the private office market, where 56 percent expect activity to decline, followed by the retail, warehouse and lodging market, where 52 percent expect less activity. Contractors are most optimistic about the hospital and higher education market, where 32 percent expect growth, and the power market, where 29 percent expect growth. However, even for those markets, 36 percent of contractors expect the hospital and higher education market to shrink and 32 percent expect the power market to contract.

Contractors’ low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. Clear majorities of firms (ranging from 56 percent to 66 percent) expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30 percent of firms report they plan to perform stimulus-funded work this year, down from the 45 percent that reported performing stimulus-funded work in 2009 or 2010.

“The stimulus propped up many construction jobs during the past two years,” said Ken Simonson, AGC chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. “The stimulus is already becoming a thing of the past in most contractors’ minds.”

The dour market outlook appears to be affecting demand for new construction equipment. Only 28 percent of firms report plans to purchase new construction equipment in 2011, down from the 34 percent that reported purchasing equipment last year. Investment levels among the firms planning to buy equipment appear to be heading up, however. Firms report plans to spend nearly $900,000 on average for new equipment, up from average totaling of $671,000 last year.

Bid levels will remain very competitive this year. According to the survey results, 29 percent of firms report they plan to lower bid levels in 2011. That follows a year when 74 percent of firms reported lowering bid levels, including 7 percent  that reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms’ bottom lines, 71 percent of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.

The outlook, which the association co-sponsored with expert services firm Navigant, was based on survey results from nearly 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing and business plans. Economists and specialists from the association and the firm analyzed those comments to craft the outlook.

Construction Unemployment Jumps in January

Despite a slight decrease in the national unemployment rate, job losses continue to mount in the construction industry as the unemployment rate rose to 22.5 percent in January, according to the February 4 employment report by the U.S. Labor Department. Year-over-year, the industry has lost 130,000 jobs, or 2.3 percent of preexisting totals. These new numbers are up from 20.7 percent in December, but down from 24.7 percent one year ago. Nonresidential building construction lost 6,700 jobs in January, the largest monthly loss since February 2010. Over the last 12 months, nonresidential building construction employment is down by 8,800 jobs, or 1.3 percent.

Heavy and civil engineering construction employment fell by 7,000 jobs in January and has lost 22,400 jobs in the last two months. But employment in that sector is up by 12,900, or 1.6 percent, compared to January 2010 levels. The specialty trade contractor sector lost jobs for the third straight month, down 14,900 in January, and has lost 102,000 jobs or 2.9 percent over the last 12 months. Residential building construction lost 3,200 jobs in January and 32,300 jobs, or 5.5 percent, from the same time last year.

Overall, the nation gained 36,000 jobs in January as private sector employment grew by 50,000 jobs and the public sector lost 14,000 jobs. Year-over-year, the nation has added 984,000 jobs, or 0.8 percent. The national unemployment rate dropped from 9.4 percent last December to 9 percent in January, the lowest level since April 2009.