Construction Spending Drops to Six-Year Low

Construction employment grew in only four of 337 metropolitan areas in 2009, as spending on construction projects dropped by $100 billion in December to a six-year low of $903 billion, according to an analysis of federal figures released by The Associated General Contractors (AGC) of America.

“The impact of the stimulus is clearly being overshadowed by the sweeping downturn in overall construction demand,” Ken Simonson, AGC of America's chief economist, said. “Without those public investments, however, a bad employment situation will only get worse during 2010.”

Simonson noted Census Bureau figures show that private nonresidential spending dropped 18 percent compared with December 2008. He added that only power construction increased (by 14 percent) from year-ago levels. Developer-financed categories recorded especially large declines, including lodging (down 46 percent); retail, warehouse, and farm (down 37 percent); and office (down 35 percent).

In contrast, publicly funded construction increased by 1.0 percent between December 2008 and December 2009, Simonson noted. He added that stimulus spending helped boost highway and street construction by 3.7 percent, making it the largest public category. Educational construction, however, dropped 4.0 percent during the year. Private residential construction, meanwhile, dropped 11 percent during the year, as multifamily construction tumbled, even thought spending on single-family housing has increased for seven months in a row.

Simonson said the declines in construction spending were leading to layoffs in almost every community in America. Leominster-Fitchburg, Mass., lost a larger percentage of its construction workforce (38 percent) during 2009 than any other metropolitan area, according to Bureau of Labor Statistics figures. Other areas experiencing sharp declines in construction employment during the year were El Centro, Calif. (36 percent), and Santa Fe, N.M.; Pocatello, Idaho; and Kokomo, Ind. (all 29 percent). Meanwhile, the Houston area lost the most construction jobs (25,500) between December 2008 and December 2009.

Of the four metropolitan areas with an increase in construction employment from December 2008 to December 2009, only two had gains of more than 100 jobs: Harrisburg-Carlisle, Pa. (1,500 jobs, 13-percent gain), and Tulsa, Okla. (700 jobs, 3-percent gain). Two metropolitan areas had gains of 100 jobs each in construction: Springfield, Ohio (8 percent), and Columbus, Ind. (5 percent).

AGC of America officials cautioned that without new investments in infrastructure projects, construction employment will only get worse. They noted that the Fiscal Year 2011 budget request released by President Obama outlines some important new infrastructure investments, including establishing a national infrastructure fund and boosting investments in high-speed-rail and new air-traffic-control facilities. Many of those new investments were offset by cuts for new water-infrastructure and levee projects, however.

“Failing to make vital investments in our infrastructure will cost even more jobs while undermining our ability to compete globally for years to come,” Stephen E. Sandherr, AGC of America's chief executive officer, said.

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