March 18, 2009 / 7:31 PM / 9 years ago

U.S. construction jobs seen weak for rest of 2009

By Nick Zieminski - Analysis

A worker (R) takes measurements before seat supports are placed on the middle level, in the interior of the new stadium being constructed for the New York Jets and New York Giants in East Rutherford, New Jersey, November 20, 2008. REUTERS/Ray Stubblebine

NEW YORK (Reuters) - The U.S. jobs sector hit hardest by the recession, construction, may not reach bottom until sometime next year.

With one in five U.S. construction workers out of a job, prospects for the sector remain dim amid ongoing cuts in construction spending, a decline in nonresidential projects, and concerns that government stimulus will take months to have any measurable effect, industry experts say.

“The construction industry is in a near depression,” said General President Terry O’Sullivan of the Laborers’ International Union of North America, which notes that the construction unemployment rate, at 21.4 percent, is the highest of any sector.

Construction employment fell by 104,000 jobs in February, marking the 20th consecutive monthly decline, and is down by 1.1 million since the start of 2007. While construction accounts for one in 20 jobs, one-fifth of all job cuts have come in this sector.

“We may well see negative construction employment figures for the rest of this year,” said Kenneth Simonson, chief economist of the Associated General Contractors of America.

He cited recent double-digit declines in nonresidential building starts and in highway and public work construction. Local school projects, which in recent years have had three or four bidders, now have 25 to 30 contractors putting in bids.

Construction employment peaked at 7.7 million two years ago, and it will take years to revisit those levels, Simonson said.

Until last year, relative strength in nonresidential construction had offset weakness in housing and absorbed some of the job losses from homebuilding, said Kermit Baker, Chief Economist of the American Institute of Architects (AIA).

“Now that nonresidential has softened, we’re seeing no place to hide,” he said.


To be sure, there are some early glimmers of hope for construction. U.S. housing starts unexpectedly rebounded in February, rising 22 percent, the biggest jump since January 1990 and the first increase since April.

A Manpower Inc (MAN.N) hiring outlook found construction sector employers anticipate a moderate increase in the hiring pace in the second quarter versus the first quarter.

Along with leisure and hospitality, construction was one of just two sectors where the outlook improved for the second quarter, among 13 sectors tracked by Manpower. Still, the percentage of employers planning to cut jobs was above those planning to add them, Manpower noted.

    Then there is the stimulus. The contractors’ group estimates the government will inject up to $144 billion into U.S. construction, with about a third dedicated to transportation projects.

    While direct spending on the sector should have some effect, the real hope for the stimulus is that it boosts lending and eventually leads to a cyclical upturn for the economy, AIA’s Baker said. Then, residential construction would likely to lead the way up — but not anytime soon.

    “We’re still talking 2010 before we see a significant upturn on the residential side,” Baker said. A construction index ticked up last month, but the architects’ group said the downturn was not yet over.

    Many people who worked in construction will return to the sector once a recovery takes hold. But many jobs at architecture firms, where payrolls are down 8 percent since last summer, will not be coming back, Baker said, since technical skills atrophy and coming back into the industry often means starting back at the bottom of the pay ladder.

    The Obama stimulus will put some people to work as soon as next month, but it will not be a major factor until the third quarter, Simonson said. Even then the stimulus will have little visible impact on payrolls, since contractors will use existing workers before they bring back people who have been laid off or start to hire new people.

    The rebound in housing starts is unlikely to mark a recovery since single-family home starts showed only a modest increase last month.

    That metric would have to gain for several months in a row before one could call a bottom in housing, Simonson said.

    “It’s way too early to break out the champagne,” he said.

    Reporting by Nick Zieminski, editing by Gerald E. McCormick

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