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ABC Predicts 2012 Will Be a
Slow Year for Construction
Associated Builders and Contractors (ABC) in November
released its 2012 economic forecast for the U.S. commercial
and industrial construction industry. “ABC’s analysis
of construction trends indicates 2012 will be a year of
gradual progress as advances in private construction are
partially offset by ongoing declines in publicly financed
construction,” said ABC Chief Economist Anirban Basu.
“Nonresidential construction spending is expected to
grow 2.4 percent in 2012 following a 2.4 percent decrease
in 2011,” Basu said. “The pace of recovery in the nation’s
nonresidential construction industry remains soft and
2012 is positioned to be a year of slow gain. The first half
of 2012 may be particularly challenging, a reflection of
the soft patch in economic activity experienced during
much of the first half of 2011.
“ABC’s national Construction Backlog Indicator, which
stood at 8.1 months for both the second and third quarters
of 2011, is not expected to advance substantially and
likely will remain in the vicinity of 8 months of backlog
for much of 2012,” said Basu. “However, backlog is one
month higher from the same time last year. A backlog of
less than 8 months is associated with construction spending
declines, while a backlog exceeding 8 months is statistically
associated with future construction spending
increases. Today’s level of backlog is consistent with flat
construction spending.
“Nonresidential building construction employment is
expected to increase 0.4 percent in 2012 following lackluster
0.6 percent growth in 2011,” Basu said. “Employers
will continue to seek increased productivity among existing
workers in order to boost weak industry margins.
“There may be a degree of relief for construction contractors
with respect to materials prices. In 2011, prices
for construction inputs rose 7.5 percent,” said Basu. “ABC
expects 2012 materials prices will rise 4.7 percent. Despite
a sluggish construction recovery, input prices are likely to
remain elevated as global investors retain significant ownership
in commodities and hedge against risks emerging
from Europe, the United States, China and Brazil.
“The direction of the U.S. dollar will play a major role in
determining construction input prices in 2012. However,
the dollar’s direction is far from obvious,” Basu said.
“Although the nation continues to run a large trade deficit,
which implies further deterioration in the value of the dollar
over time, investors often race to dollar-denominated
assets during times of global financial stress. We are in one
of those times now, which could keep the dollar inflated in
2012. While this would create a more challenging environment
for U.S. exporters, it would likely result in lower
construction materials prices.”
Construction Industry Loses 12,000
Jobs in November
The nation’s construction industry lost jobs for a second
straight month, shedding 12,000 jobs in November, according
to the Dec. 2 jobs report by the Department of Labor.
During the past 12 months, the construction industry has
FINANCIAL REPORT
added 18,000 jobs, or 0.3 percent. The construction unemployment
rate slipped from 13.7 percent in October to 13.1
percent in November, and is down from 18.8 percent in
November 2010.
Nonresidential building construction employment
decreased by 1,200 jobs for the month, but has added 9,900
jobs, or 1.5 percent, from the same time last year.
Nonresidential building construction employment currently
stands at 668,700.
The nonresidential specialty trade contractor subsector
lost 3,500 jobs for the month and has lost 9,900 jobs, or 0.5
percent, compared to the same time last year. Heavy and
civil engineering construction sector employment fell by
7,000 jobs in November and has shed 2,900 jobs, or 0.3
percent, year-over-year.
Residential construction building employment decreased
by 3,000 jobs for the month and has lost 400 jobs, or 0.1
percent, compared to the same time last year. The residential
specialty trade contractor subsector added 3,000 jobs in
November, partially offsetting losses experienced by nonresidential
specialty trade contractors. Year over year, the
residential specialty trade contractor subsector has added
20,800 jobs, or 1.4 percent.
Across all industries, the nation added 120,000 jobs as the
private sector expanded by 140,000 jobs and government
lost 20,000 jobs. The nation has added 1,600,000 jobs or 1.2
percent. The unemployment rate dropped from 9 percent
in October to 8.6 percent in November.
“Today’s employment release will be heralded by many as
a major indication of progress,” said Associated Builders
and Contractors Chief Economist Anirban Basu.
“Unfortunately, the nation’s nonresidential construction
industry is, for the most part, not a participant in this positive
dynamic.
“Nonresidential building construction employment
slipped again in November, at least partially a reflection of
the weakness that overtook the economy earlier this year,”
Basu said. “Heavy and civil engineering declined by 7,000
jobs, likely a reflection of the winding down of federal
stimulus spending.
“While the nation’s overall unemployment rate is now
below 9 percent for the first time since March 2011, the
construction industry unemployment rate remains elevated
at 13.1 percent,” said Basu.
“Overall, the last 10 weeks have ushered forth a period of
remarkably better news regarding the economic recovery,”
Basu said. “During portions of the summer, it appeared that
the economy was on the brink of recession. Financial markets
were chaotic in August. Since that time, consumer
spending and business confidence has been on the rise,
translating into more robust employment gains.
“However, because construction is a lagging indicator,
construction activity needs to increase before we see the
industry’s unemployment rate begin to decrease,” said Basu.
“According to ABC’s 2012 Construction Economic Forecast,
we can only expect to see gradual progress in construction
activity next year.”
November/December 2011
Water Utility Infrastructure Management 19