The commercial construction industry is a funny thing. Even during the toughest times, there are clear opportunities for construction related business to turn a profit. Stimulus money and other public funds drove work in the public sector through parts of 2011.
When those funds ran out, and the industry appeared to be headed for another downward spiral, forecasts of more private construction spending started to roll in. Emerging industries like Marcellus Shale have created the need for new pipelines, drilling pads, infrastructure, and civic projects in regions of Pennsylvania. In the near future, hospitals, schools and other public facilities will need to grow in the Marcellus Shale region as the population increases.
The construction industry always seems to adapt, or maybe, as people adapt it drives a need for construction. Either way, predicting the direction of the industry can be as challenging as accurately tracking a storm. All the data available can say one thing, but an unpredictable twist is always in play.
Compared to 2005-2007, one of the busiest times for the industry, construction is suffering. A recent report in Engineering News Record had unemployment in the industry at 16 percent. That’s seven points lower than the national unemployment rate (nine percent) and much higher than the seven percent industry unemployment rate of 2007.
The unemployment numbers certainly aren’t positive, and there are many who fear they could get worse. Many companies are still working on projects that began during the 2005-2007 period, and some are wondering if there will be any new jobs available once they finish.
Fortunately, there are indications that new projects will be there. For instance, the American Institute of Architects Architecture Billings Index, finished 2011 strong. According to the AIA:
Continuing the positive momentum of a nearly three point bump in October, the ABI reached its first positive mark since August. As a leading economic indicator of construction activity, the ABI reflects the approximate 9 to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 52.0, following a score of 49.4 in October. This score reflects an overall increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 65.0, up dramatically from a reading of 57.3 the previous month.
“This is a heartening development for the design and construction industry that only a few years ago accounted for nearly ten percent of overall GDP but has fallen to slightly less than six percent,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Hopefully, this uptick in billings is a sign that a recovery phase is in the works. However, given the volatility that we’ve seen nationally and internationally recently, we’ll need to see several more months of positive readings before we’ll have much confidence that the U.S. construction recession is ending.”
While the national Associated Builders and Contractors predicts that 2012 will be a slow year for construction, their chief economist is still calling for nonresidential construction spending to grow by 2.4 percent in 2012 after a decrease of the same percentage in 2011.
The Associated General Contractors reported that construction spending hit a 17-month high in November 2011, totaling $807 billion. Both private nonresidential construction and public construction increased compared to October.
With a somewhat positive finish to 2011 and the ABI indicating a stronger demand for design services, the industry is positioned to perform better in 2012.