The number of people working in construction is approaching a 14-year low now that the industry lost 21,000 jobs in September, while construction unemployment is at a September high of 17.2%, according to an analysis of federal employment figures released by the Associated General Contractors of America.
The construction industry continues to suffer from declining investments in construction and broad uncertainty about the future of many federal infrastructure programs and tax rates, association officials noted.
“It has taken less than four years to erase a decade’s worth of job gains as the industry suffers from declining private, state and local construction demand,” says Ken Simonson, the association’s chief economist. “No other sector of the economy has suffered as much for as long as construction.”
Simonson notes that the 5.6 million people working in construction today is barely higher than the 5.59 million people who were working in construction in August 1996. He added that construction employment continued to lag behind other sectors of the economy.
For example, while total private employment rose by 593,000 during the past 12 months, the construction industry lost 210,000 jobs. Meanwhile, the industry’s unemployment rate is nearly double the unadjusted national rate of 9.2%.
Most of September’s construction job losses came from the nonresidential sector as demand for commercial facilities and infrastructure projects remains weak, Simonson says. Residential construction lost 2,500 jobs last month while nonresidential construction lost 18,100 jobs. Nonresidential specialty trade contractors were the hardest hit, having lost 19,500 jobs in September, the economist adds.
Association officials note that construction spending figures released late last month show private, state and local construction spending continues to decline. And while federal spending has increased, most of those investments have come from temporary programs like the stimulus and military base realignment programs.
While these temporary federal programs have helped the industry, many contractors are reluctant to expand payrolls while long-term federal programs that fund highway, transit, water system and aviation related construction remain in limbo, association officials say. They add that most contractors don’t even know what their tax rates will be for next year.
“Construction firms aren’t going to start hiring again until they can predict how busy they’ll be,” says Stephen E. Sandherr, the association’s CEO. “Frankly it is hard for contractors to make any business decisions when they don’t know how much they’ll make or how much they’ll owe.”
Meanwhile, in the 11th annual survey of owners conducted by the Construction Management Association of America and FMI, America’s construction owners have significantly reduced their in-house design, engineering and construction management staffs during the recession, and don’t expect to return to prior staffing levels for many years, if at all.
More than 300 owners, across a wide range of markets and regions, responded to the survey, whose results were disclosed at the CMAA National Conference & Trade Show in San Diego earlier this month.
“In the view of more than half of all owners, diminished staff resources are a permanent condition,” the survey reports. Even when owners begin to staff up again, survey respondents say they expect to try to meet their workforce needs by hiring less expensive staff, hiring retirees or recruiting current staff to stay on the job past their expected retirement dates.
“The trends described in this report will profoundly affect owners’ ability to manage projects effectively,” the survey report says. “As a result, owners will increasingly be faced with a choice: Scale back their capital design and construction activities (at the risk of compromising mission), risk suboptimal outcomes as a result of staff overwork or find additional resources outside of their organization.
“How owners perceive and implement these choices will continue to shape the practice of professional construction and program management long after the current economic downturn is past. Indeed, these permanent changes in the business environment may be the recession’s most lasting and important legacy.”
Specifically, the CMAA/FMI owners survey found:
• About half of all owners experienced some level of significant staffing reduction in the last 24 months. This includes 18% who say their staffs were down by more than 20%.
• Owners have reduced staff through attrition (38%), layoffs (32%), early retirements (19%), and mandated unpaid time off (11%).
• More than 40% of owners expect to resume hiring either in 2013 or later (14%) or never (28%).
• When hiring resumes in the future, 56% of owners expect to have to rely on alternative strategies like retention beyond retirement, using part-timers, hiring more junior staff, and hiring from competitor and consultant workforces.
In the long run, the survey report says, “Opportunities exist for more dramatic involvement by all types of service providers earlier in the process. The reported reduction in staffing and difficulty in finding future staff creates a host of opportunities for visionary service providers to step in and fill this void as the health of the construction industry improves.”
At the CMAA National Conference, FMI Principal Mark Bridgers presented the survey findings, which were then discussed by an owner panel consisting of Neil Drucker, Los Angeles Parks Department; Robert Stundtner, Cornell University; Stephen Ayers, AIA, Architect of the Capitol; Marcia Hurd-Wade, city of Atlanta-Watershed Management, and Mark Hellstern, Tennessee Valley Authority-Nuclear Generation. Copies of the full survey report will be available through CMAA and FMI web sites in mid-October.