Construction spending drops to six year low

Construction employment grew in only 4 out of 337 metropolitan areas in 2009 as spending on construction projects dropped by $100 billion in December to a 6-year low of $903 billion, according to an analysis by the Associated General Contractors of America.

“The impact of the stimulus is clearly being overshadowed by the sweeping downturn in overall construction demand,” said 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 show that private non-residential spending dropped 18 percent compared to December 2008. He added that only power construction increased from year-ago levels, by 14 percent. Developer-financed categories recorded especially large declines, including lodging (down 46 percent); retail, warehouse and farm (down 37 percent); and office (down 35 percent).

In contrast, publicly-funded construction increased by 1.0 percent between December 2008 and 2009, Simonson noted. He added that stimulus spending helped boost highway and street construction by 3.7 percent, making it the largest public category. Educational construction, however, dropped 4.0 percent during the year. Private residential construction dropped 11 percent for the year as multi-family construction tumbled, even though spending on single family housing has increased for 7 months in a row.

Simonson said the declines in construction spending were leading to layoffs in almost every community in America. Leominster-Fitchburg, Massachusetts lost a larger percentage of its construction work force (38 percent) 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, California (36 percent); Santa Fe, New Mexico; Pocatello, Idaho; and Kokomo, Indiana (all 29 percent). Meanwhile, the Houston, Texas area lost the most construction jobs (25,500) between December 2008 and 2009.

Of the 4 metropolitan areas with an increase in construction employment during the past 12 months, 2 areas had gains of more than 100 jobs: Harrisburg-Carlisle, Pennsylvania (1,500 jobs, 13 percent gain) and Tulsa, Oklahoma (700 jobs, 3 percent gain). Two metro areas had gains of 100 jobs each in construction: Springfield, Ohio (8 percent) and Columbus, Indiana (5 percent).

Association officials cautioned 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.