Legislation to Focus on Jobs

February 22, 2010
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National health care is on the back burner, and the fate of climate change legislation looks grim. Two significant pieces of legislation that could have an effect on the HVAC industry lay in the wake of President Obama’s Jan. 27 State of the Union address. The shifting focus of his administration is swinging once again to jobs. Making a brief splash in the American Recovery and Reinvestment Act (ARRA), addressing the need for jobs came in the form of shovel-ready projects aimed primarily at infrastructure improvements. New efforts like the improvement program dubbed Cash for Caulkers and new jobs legislation beginning to buzz on Capitol Hill are a second wave of economic improvements that the administration is making towards bringing the jobless rate down to a more manageable percentage.

Recovery, however, continues to occur slowly and according to a new national construction hiring and business outlook forecast conducted by the Associated General Contractors of America (AGC), “Nearly nine in ten construction contractors say there will be no recovery in 2010.”

Released in late January, the outlook revealed that 2009 took its toll on the construction industry and continues to take its toll in 2010.

“Construction spending declined last year by $137 billion, and is now at the lowest level in six years. And while only 5 percent of the U.S. workforce, construction workers shouldered 20 percent of non-farm layoffs last year,” explained Stephen Sandherr, CEO of AGC, during his remarks on the outlook. “As the latest federal employment figures make clear, the depression-like conditions in the construction industry are one of the main factors dragging on overall employment.”

The outlook, which is based in part on survey responses from nearly 700 construction firms submitted in late December and earlier this year, shows that privately-funded construction activity is likely to decline even further. Sixty-four percent of responding contractors expect demand for new manufacturing facilities will decline, while 71 percent expect demand for new retail, warehouse, and lodging facilities will drop.

As a result, the number of firms expecting to buy new equipment is down to 46 percent this year from 61 percent in 2009. Meanwhile, 81 percent of firms report already having to cut profit margins in their bids just to stay competitive and another 10 percent say they are now submitting bids so low they will actually lose money on the projects.

Sandherr added that many construction firms are uncertain that they’ll be able to add staff following a year of record layoffs. In 2009, 73 percent of firms said they laid off employees, averaging 39 layoffs per firm. For 2010, however, 60 percent of firms say they are unsure whether they will be able to add new staff, or be forced to make further cuts.

STIMULUS-FUNDED SILVER LINING

One of the relatively few bright spots for the industry was the federal stimulus. Thirty-one percent of contractors say they were awarded stimulus-funded projects. Of these, 46 percent say the stimulus helped them retain an average of 24 employees each. Another 15 percent say the stimulus helped them to add an average of 10 new employees per company while 12 percent cited the stimulus as driving new equipment purchases.

Sandherr added that the stimulus is driving up expectations for publicly funded construction activity in 2010. He noted that 62 percent of contractors expect the highway market to improve or remain stable, 61 percent say water and sewer construction will improve or remain stable. Fifty-five percent say work on public buildings will improve or remain stable in 2010.

“The stimulus is finally beginning to have a measurable, but limited, impact on the construction industry,” Sandherr noted. “The full impact of those investments has sadly been tempered by the inability of Congress to put a host of multi-year infrastructure funding plans in place.”

In addition to stimulus-funded projects, contractors also are relatively upbeat about prospects for power and hospital/higher education construction. Fifty-two percent expect demand for power facilities to be at or above last year’s levels, while 57 percent of contractors expect growth or stability in demand for hospital and higher education construction.

“What does all of this mean for the construction industry and more broadly for our economy?” asked Sandherr. “Most obviously, it means the construction industry is in for another difficult year in 2010. Worse, as long as the construction industry remains mired in its own depression, broader economic and employment growth will continue to lag.”

Publication date: 02/22/2010

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