Construction Spending Drops to Lowest Level in Six Years

Feb 2, 2010 2:28 PM

Construction employment grew in only four out of 337 metropolitan areas in 2009 as spending on construction projects dropped by $100 billion in December to a 6-yr low of $903 billion, according to a recent analysis of federal figures released on February 1 by the Associated General Contractors of America (AGC).

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

Simonson noted new Census Bureau figures released on February 1 show that private non-residential spending dropped 18% compared to December 2008. He added that only power construction increased from year-ago levels, by 14%. Developer-financed categories recorded especially large declines, including lodging (down 46%); retail, warehouse and farm (down 37%); and office (down 35%).

In contrast, publicly funded construction increased by 1% between December 2008 and 2009, Simonson notes. He adds that stimulus spending helped boost highway and street construction by 3.7%, making it the largest public category. Educational construction, however, dropped 4% during the year. Private residential construction dropped 11% for the year as multi-family construction tumbled, although spending on single-family housing has increased for seven months in a row.

Simonson says 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 work force (38%) during 2009 than any other metropolitan area according to the latest Bureau of Labor Statistics figures. The agency includes mining and logging with construction in most metro areas to prevent disclosure about industries with few employees. Other areas experiencing sharp declines in construction employment during the year include El Centro, Calif. (36%); and Santa Fe, N.M.; Pocatello, Idaho; and Kokomo, Ind. (all 29%). Meanwhile, the Houston, Texas, area lost the most construction jobs (25,500) between December 2008 and 2009.

Of the four metropolitan areas with an increase in construction employment during the past 12 months, only two areas had gains of more than 100 jobs: Harrisburg-Carlisle, Pa. (1,500 jobs, 13% gain) and Tulsa, Okla. (700 jobs, 3% gain). Two metro areas had gains of 100 jobs each in construction: Springfield, Ohio, (8%) and Columbus, Ind. (5%).

Association officials caution 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, however, were offset by cuts for new water infrastructure projects and levee projects, for example.

Source: Associated General Contractors of America