Business forecast shows layoffs planned in nonresidential construction sector
Two-thirds of the nation's nonresidential construction companies plan to cut their payrolls, the Associated General Contractors of America reported Thursday in its employment and business forecast.
Those layoffs are expected to result in a 30 percent decline in the number of people working on construction projects.
"Unless the business climate changes significantly and soon, the construction sector will continue to experience the kind of devastating job losses and crippling declines in business activity that will undermine efforts to end the recession," AGC Chief Executive Officer Stephen Sandherr said in a conference call from Washington, D.C.
The key to getting the economy back on track, Sandherr said, is timely distribution of the estimated $1 trillion stimulus package being planned by President-elect Barack Obama.
Construction companies would increase their payrolls by 25 percent if the package includes new infrastructure investment, AGC reported. They would also invest $500,000 in new equipment.
AGC chief economist Ken Simonson estimated the stimulus investment in Nevada would generate $1 billion in nonresidential construction spending, adding about $2 billion to the state's gross domestic product. It would create or sustain 17,000 construction jobs and add about $665 million to personal earnings.
About 5,800 of those jobs would be on-site construction jobs located in Nevada and another 2,700 would be direct and indirect jobs associated with construction supply materials and services.
Simonson said he didn't know if it would free up financing for troubled construction projects in Las Vegas, but said it would have a direct impact on "huge infrastructure needs" such as the widening of Interstate 15 and new school construction, which has gone from about six schools a year to none.
"So all of those things would get some portion of the infrastructure package," he said.
Nearly every state in the nation is running a budget deficit and looking at larger deficits in 2009, Simonson said.
Construction employment, both residential and nonresidential, declined in all but a handful of states, including Oklahoma, Texas and Wyoming, he said. The industry employed 115,000 workers in Nevada in October, down 30,500, or 20.9 percent, from peak construction employment in June 2006.
In 2007, 227,000 jobs were supported in Nevada by direct and indirect outlays related to the state's nonresidential construction spending, which was an estimated $13.2 billion, AGC reported.
The stimulus package uses a formula to put in states with infrastructure projects that are "shovel-ready," Simonson said.
About one-third of the money goes to construction companies and their workers; one-sixth goes to material suppliers, design and engineering firms; and the other half goes to the local economy in indirect services, Simonson said.
"So it gets diffused very widely and very quickly," he said. "With infrastructure, you're getting a product that will serve the community for decades. Also, that money isn't sitting on the ground in that one spot."
Direct construction spending in Nevada contributed $26.6 billion to the state gross domestic product, or roughly 21 percent, in 2007, according to the latest statistics available from AGC.
Doug Pruitt, chairman and chief executive of Sundt Construction in Tempe, Ariz., said he's seen a 30 percent drop in the backlog of jobs in the past 12 months, but he's still been able to retain skilled workers. A project manager may have to go back to being a project engineer and a foreman may go back to being a craftsman, he said.
"We are a small, private company and when there's a downturn, you try to protect the cash you have and that runs counterproductive to the future," Pruitt said on the call. "There's still money that is being spent, although it is a lot less. We're just trying to follow the money. Where there is money being spent, we're chasing those areas."
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
