‘A very cold winter for construction,’ says AGC economist

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“This isn’t a weather report but an economic one,” says Associated General Contractors chief economist Ken Simpson.

The Bureau of Labor Statistics reported that construction employment in January tumbled by 32,000 jobs. Some of that job loss may be attributable to projects that didn’t start during harsh midmonth weather conditions. But most of the decrease reflects the ongoing decline in construction activity, which has lasted for almost five years. The high points for construction employment and spending were in the spring of 2006. The January employment total was the lowest since 1996.

As for construction spending, the Census Bureau reported on February 1 that spending in December was at the lowest level since July 2000. For the year as a whole, spending was down more than 10 percent from 2009, the fourth yearly decrease in a row and the lowest annual total since 2000—even without adjusting for inflation.

Nevertheless, there are a few signs that a thaw is beginning. Several billion dollar-plus manufacturing projects have been announced, won permits or broken ground in recent weeks. Market-rate multifamily rental projects have started up in a number of metro areas as vacancy rates edge down from recent highs and effective rents begin to rise. A variety of large hospital projects are underway or in fundraising phases. And warehouse and truck terminal construction should pick up as exports, imports and domestic sales keep rising.

Offsetting these positives will be the conclusion of many base realignment (BRAC) and stimulus projects. Funding for construction by all levels of government appears likely to hold level, at best, through most of 2011, and probably drop off sharply by yearend or early in 2012.

Expect total construction spending to increase between 3 and 7 percent in 2011 as a whole compared with 2010. That will be a welcome turnaround but will not even bring spending back to 2009 levels. Read More.

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