AGC Outlook Report Says Construction Firms Will Make Fewer Layoffs This Year
January 23, 2012

by Sahely Mukerji, smukerji@glass.com

While construction material prices continue to rise and bid prices remain low, the construction industry now shows 16 percent unemployment, down from 21 percent a few years ago, said Stephen Sandherr, CEO of Associated General Contractors (AGC) of America in Arlington, Va., during a media conference call today. "Construction firms added 50,000 new employees in 2011, even though federal construction projects shrank sharply and there was a 6 percent cut in federal construction," he said. "In 2012, construction outlook remains mixed. Conditions are stabilizing, but recovery is not expected until 2013."

Sandherr shared the results of AGC's 2012 Construction Hiring and Business Outlook report based on survey results from more than 1,300 construction firms from 50 states, the District of Columbia and Puerto Rico.

"Only 9 percent of construction firms are planning to lay off in 2012 compared with 37 percent last year and 55 percent in 2010," Sandherr said. "And 32 percent of firms report they plan to add new staff in 2012. Half of those firms report plans to add six or more new employees during the next 12 months."

"Majority of constructions firms in the survey expect the dollar volume of projects they compete for to either grow or remain stable in every market segment," said Ken Simonson, chief economist of AGC. "Forty-four percent of contractors expect the market for new public buildings to shrink, 41 percent expect the market for K-12 school construction to shrink and 40 percent expect the highway market to contract."

Roughly 75 percent of contractors expect the power, hospital and higher education markets to expand or remain stable this year, Simonson said. "Back in 2008 both hospitals and higher education [sectors] were starting a lot of construction, planning a great deal," he said, "but once the stock market lost 44 percent of its value, those changed. In the last year, while the stock market did not soar, it did recover some, and some of these activities will resume in 2012. However, 75 percent of these projects are publicly funded, so I'm a little skeptical. Some of the colleges are state funded, and the money hasn't been coming in steadily, so the improvement will be modest."

The retail sector has seen an increase in spending the first few months of 2011, but that was on remodeling, Simonson said; that trend will continue in 2012. "Per the survey, 25 percent of contractors said they expected private office outlook to see 25 percent less activity [this year], and 21 percent said more activity," he said.

Banks are making life harder for contractors. Nearly half - 49 -- percent of responding firms reported that tighter lending conditions have forced their customers to delay or cancel construction projects, Simonson said. "The green market is cooling," he said. "Perhaps related to the tough credit environment, 60 percent of firms expect demand for green construction projects to either stagnate or decline in 2012. The impact of the stimulus also is fading fast."

The stimulus money invested in infrastructure did keep a large number of employees on payroll, Sandherr said. "We were pushing for more in infrastructure, because the construction industry had 21 percent unemployment at the time. That number has come down to 16 percent, so, stimulus had a positive impact. We would've liked to see more."

In face of the above, contractors are being cautious with their plans for acquiring new construction equipment, Simonson said. "Forty percent of firms plan to buy new equipment this year, while 66 percent plan to lease," he said. "57 percent say they will buy $250,000 or less in equipment and 70 percent say they will lease $250,000 or less worth of equipment this year."

Cash flow continues to be a concern with the contractors surveyed, Sandherr said. Complicating matters more is rising costs of health care. "Among the 96 percent who plan to provide health care, 82 percent expect their healthcare costs to increase," he said. "Eight-one percent said they paid more in health care in 2011."

Click here for the 2012 Construction Hiring and Business Outlook report. Click here for the survey results. Click here for state-by-state survey results.

Subscribe to USGlass magazine.
Subscribe to receive the free e-newsletter.