Contractors Say Stimulus May Help in Economic Turnaround; AGC Survey Predicts Two-thirds of Nation's Construction Companies to Make Layoffs in '09

According to new employment and business forecast figures released yesterday by the Associated General Contractors of America (AGC), an estimated two-thirds of the nation's non-residential construction companies are planning layoffs this year. The 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," said AGC chief executive officer Stephen Sandherr during a press conference call yesterday afternoon.

Sandherr, along with Ken Simonson, AGC chief economist, and a number of construction contractors, discussed the AGC's construction employment and business forecast for 2009. They also talked about how planned stimulus investments could improve the business and employment outlook for this year.

The forecast results, which are based on a representative survey conducted by the construction association late in 2008, found no relief in sight for construction companies that already have been among the hardest hit by the economic slowdown. According to the forecast figures, contractors have seen or are planning for declining activity in every type of construction market, with 92 percent of building contractors expecting or experiencing declining activity.

"Nobody would be happier to be wrong about these estimates for 2009 than our member firms," said Sandherr, who added that with a stimulus, construction companies would be able to get more people back to work and more money into the economy.

"Without a stimulus, construction companies will cut jobs, slash spending and continue to be among the hardest hit," Sandherr said. He added that his group is calling for $2.2 billion to help renovate hundreds of federal facilities, as well as additional funding to repair schools. They are also working with different groups to call for tax incentives in areas such as energy-efficient buildings and renewable energy facilities. In addition, it is calling for the establishment of an economic "crisis zone" that would provide tax exemptions and private activity bonding authority to finance construction projects in areas where there has been double-digit unemployment two months in a row.

With regard to green building and the stimulus package, Sandherr said that there likely would be a significant amount devoted to providing tax incentives for energy-efficient buildings as well as funding at the government level to allow schools to increase their levels of energy efficiency. However, if asked that question by the policy makers Sandherr said that he would "caution … that if the objective is to get [money out and projects started] quickly it would be counterproductive to add smart growth requirements."

He added that a number of groups already have shovel-ready projects; those projects that can get people to work and immediately generate some economic activity. The Government Services Administration, for example, has identified $2.2 billion worth of government building projects that are ready to go.

"The National Education Association has identified $300 billion worth of school projects that they think could be funded, but clearly, that's not the number that will be in the stimulus package," said Sandherr.

In terms of how the construction industry is responding to green technologies, many contractors are embracing these building practices.

Doug Pruitt, chairman and chief executive officer of Sundt Construction in Tucson, Ariz., said a lot of agencies … have adopted some level of green principles for their facilities and they want them to be LEED certified on some level.

"Companies all across the country have done a good job of getting their employees LEED AP certified so that they can provide a certain level of expertise to their customers and I think the industry has been very responsive to that," said Pruitt.

Tracy Hart, president of Tartlon Corp. in St. Louis, Mo., added that a down market is an opportunity where "we all have time to learn about green, because when [the market] comes back chances are it's going to be green construction."

The issue of labor and the immigrant workforce was also discussed.

Pruitt said several states, such as Arizona and Florida, have seen incredible growth over the years and at one point were faced with a shortage of skilled workers.

"I think because of 1), the economy and 2), because we are building a fence between us and our neighbors and 3), because of the strict immigration law that was passed, we've had a lot of immigrants leave [these states]," said Pruitt. "We now have a shortfall of workers. So the stimulus package would help put some portion of [those people] back to work. Short term, we can get the U.S. citizens who are in construction and need work back to work. In the long term the labor problem will return. We do have a shortage of people in this country to do skilled work and it is a problem. Ultimately, as the economy recovers, and it will, we will have another problem-we won't have enough workers to do the work that we will have in front of us two, three, four years from now. So I don't think we can take the ball off the immigration in the workforce issue right now just because we have an excess of workers."

CLICK HERE to read the AGC's survey results.

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