The Construction Industry in 2011

As someone who owns or works for a construction company you are most likely asking yourself this question; Will 2011 be better than 2010?  The past couple years have been difficult for everyone associated with the industry as there has been less work for everyone to work on resulting in declines in year over year revenue and reductions in labor forces.  The construction industry unemployment rate is now amongst the highest in the country and the majority of states are looking to cut spending.  So will there be signs of relief in 2011?  Whether there will be or not, there certainly is a mountain to climb.

 According to the Bureau of Labor Statistics construction unemployment has hit 20.7 percent in December 2010.  This is by no means good, but there are several mixed signals being sent.  The unemployment rate has increased as compared to November 2010, however it has decreased compared to a year ago in December 2009.  This same trend is further seen within different segments of the construction industry such as specialty contractors who actually gained jobs in December 2010 when compared to November 2010 while reflecting a loss in employment levels in December 2010 when compared employment levels a year ago in December 2009.  The single most disappointing statistic of note to end 2010 is that the heavy and civil engineering sector has shed jobs for two consecutive months which is a sign of federal stimulus spending slowing.  You can read more about the current unemployment rates within the construction industry in the Associated Builders and Contractors (ABC) Construction Economic Update here.

In addition to dismal unemployment figures facing the industry, specifically in the heavy and civil engineering sector, there was yet another blow last week when House Republicans voted to rescind a guarantee that Highway Trust Fund revenue would be spent on future infrastructure programs.  This could severally impact state spending on infrastructure projects such as highway and bridge improvements as most state budgets receive a majority of their funding for such projects from federal government.  You can read more about this vote here.   If there is any silver lining for construction firms out there that specialize in infrastructure related projects is that the country desperately needs improvements as provided by The American Society of Civil Engineers.  Their recently issued report card gave America’s infrastructure a “D” and suggests that a $2.2 trillion investment is needed to improve this grade.   So the silver lining is that something has to give and Congress will eventually have to act on allocating more federal funds to fixing America’s deteriorating infrastructure. 

Another barometer for measuring the health of the construction industry has been the AIA Architecture Billings index.    This index is a lead indicator for spending activity for nonresidential construction.  This index improved during November to the highest level since 2007 which you can read in The American Institute of Architects Pressroom.  The December index is due out next week which will provide a better measure of what to expect as 2011 begins. 

As you can see there are a number of mixed signals coming from different sources within the industry as to where the industry is heading in 2011.  It appears that spending may be on the rise which will eventually result in more jobs and a reduction in unemployment; however, based on the actions indicated above, federal government representatives in some ways appear to be working against this prospect, but also appear to be attempting to control government spending.   That being said 2011 will continue to be an uphill battle and unfortunately only time will tell when the industry will begin to follow the rest of the country out of recession.