by Brianna Crandall — January 21, 2011—The Associated General Contractors (AGC) of America recently released its analyses of new federal figures concerning construction spending, construction employment, and materials prices, with mixed results.
Construction spending increased by 0.4 percent in November, the third straight rise in the total, the AGC noted in an analysis of new Census Bureau data. Private residential and public construction each gained 0.7 percent compared with October’s totals, while private nonresidential construction edged down 0.1 percent.
“It is heartening to see three increases in a row for the total,” said Ken Simonson, the association’s chief economist. “But most categories showed more of a seesaw pattern over the past three months, indicating that construction spending remains fragile at best.” Simonson noted that the strongest category appears to be power construction, which has climbed for four consecutive months. Public construction reached a 16-month high of $318.5 billion, but is likely to decrease in 2011, Simonson observed.
Construction employment declined by 16,000 during the month of December 2010 as the industry’s unemployment rate hit 20.7 percent, according to AGC’s analysis of federal employment figures. Even as the industry continues to suffer from weak private sector demand the benefits of the temporary stimulus program appear to be winding down, association officials noted, with nothing to replace it.
Construction employment declined by 0.3 percent during the month, leaving only 5.6 million people employed in the industry, a 27 percent decline since employment in the industry peaked in August 2006 at 7.7 million, Simonson noted. During the past twelve months the construction industry has lost 93,000 jobs. Heavy and civil engineering construction, the category most likely to be affected by the stimulus and other temporary federal programs like base realignment, experienced the largest decline within the sector, dropping by 12,700 for the month.
On top of the loss of jobs, construction firms are facing increasing pressure as nearly every material used by contractors rose in price, while bid prices for new buildings remained flat, according to an AGC analysis of December producer price index figures. Prices for materials jumped 0.9 percent in December and 5.4 percent in all of 2010, while price indexes for finished buildings remained flat over both time periods, Simonson noted.
Association officials warned that the price squeeze on contractors is likely to intensify in 2011 as global demand for construction materials grows and domestic demand for construction services remains weak.
