Construction Forecast Looks Bright

March 20, 2006
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WASHINGTON - "Construction again led the employment report in February with a gain of 41,000 jobs, one-fifth of all private-sector jobs added during the month," said Ken Simonson, chief economist for The Associated General Contractors of America (AGC). Simonson was commenting on seasonally adjusted job figures released by the Bureau of Labor Statistics (BLS). "This is just the latest in a long string of employment gains. Since February 2005, construction employment has risen 346,000, or 4.7 percent; triple the overall growth rate for non-farm payroll jobs.

"As in other recent months, employment growth was well distributed across construction industry segments and regions," Simonson observed.

"All five construction job categories showed gains for the month and the 12-month period. In particular, building construction employment has not dropped, despite reports of slower housing starts and sales. Over the past 12 months, employment has increased by 3.9 percent in residential building construction and 7.6 percent in residential specialty contractors, 3.2 percent in nonresidential building and 2.2 percent in nonresidential specialty contractors, and 7.2 percent in heavy and civil engineering construction.

"As for states," Simonson said, "data released by BLS shows that from January 2005 to January 2006, construction employment rose in 46 states, remained virtually unchanged in Vermont, and fell in only Connecticut, Louisiana, Michigan, and the District of Columbia. The biggest 12-month percentage gains were in states as dispersed as Idaho (17 percent), Nevada (16 percent), Hawaii and Mississippi (14 percent each).

"The outlook for nonresidential construction is very positive for the remainder of 2006," Simonson said. "Growth appears likely for construction of factories, hospitals and other health care facilities, some retail categories, freight transportation and distribution, refineries and alternative energy facilities, and most public construction categories.

"Materials costs remain a major concern for the industry," Simonson concluded.

"The signing by the United States and Mexico of an agreement to end a 16-year anti-dumping duty on Mexican cement should lessen shortages of cement that plagued 32 states last year, but strong demand will continue to push up cement prices at double-digit rates. Petroleum- and natural gas-based inputs such as diesel fuel, asphalt, and construction plastics are also much more expensive than a year ago, as are gypsum and copper products. Materials used for nonresidential construction are likely to repeat the 8 to 14 percent price increases experienced in 2005, depending on construction type, with highway construction materials (asphalt, concrete, diesel fuel) again going up the most."

Publication date: 03/20/2006

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