This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Construction Industry Forecasts

Notes from Alex Carrick - Apr 03, 2009

Alex Carrick
The U.S. Labor Market, Problems in the Auto Sector and the Construction Investment Climate

U.S. Bureau of Labor Statistics: Another 660,000 Jobs Lost in March

The U.S. jobs picture continued to deteriorate in the latest month. What is just as disturbing is that the downward sloping employment curve is not showing any signs of flattening out yet. Exceptionally high “initial jobless claims” gave advance warning that this might be the case. Nevertheless, it is upsetting to see that total job losses in the U.S. now exceed five million since the month-to-month declines began in January 2008.

The U.S. unemployment rate, like a rocket ship after take-off, is climbing into the stratosphere. It has shot up from 4.5% in early 2007 to a current (March 2009) level of 8.5%. This has been a near doubling, with no sign of a slowdown from launch speed. The cut-back in full-time jobs year over year is now 7.5 million, but this has been partially redeemed by an increase in part-time jobs on the order of more than two million.

An Old Saying in the Gambling Fraternity

There is an old saying among the gambling fraternity that it is a lot easier to lose money than it is to make it. Certainly it can be achieved quicker. The same might be said of labor markets. It has taken only about half as long to shed the same number of jobs between early 2008 and now as it took to create them from mid 2003 to late 2007.

The level of employment in construction is now down below what it was at the start of this century and the year-over-year job loss in the industry is in double digits (-12.5%). Year-over-year manufacturing employment is not faring much better and the levels of employment in this category have done nothing but decline or lie flat since 2000.

Mirroring Impacts on Canada?

How does this impact on Canada? The problems in the manufacturing sector are common to both countries. Jobs are being lost to low-labor-cost nations in Asia and elsewhere. In addition, there is one specific issue to be resolved over the next two months concerning two former pillars of the automotive industry, General Motors and Chrysler.

What to do about Chrysler and General Motors is a huge dilemma for Washington. Even in normal circumstances, the job loss impacts of these firms failing would be enormous. It is not just a case of direct employment. It is also all the jobs with suppliers and dealers that will be hurt. And then there are other potential shock waves from such community tie-ins as the huge advertising accounts that these firms have with local newspapers and radio and television stations.

Chrysler and GM Further Down the Road

Neither Chrysler nor General Motors is going to be around in its present form much longer. Both will be drastically cutting back product lines in a “best case” scenario – Chrysler through a formal alliance with Fiat and GM by way of government edict. In a worst case scenario, the ripple effects are an unknowable step into the dark.

Washington is currently setting the agenda with these companies. The Obama administration is in danger of taking ownership of GM’s problems longer-term, in order to save jobs in strategic locales. That is a genteel way of saying regions of the country that are politically important. Public sector control and decision making with respect to such a private sector firm, which depends on consumer buying preferences tied to quality, price and style, is a formula for deep-seated and long-lasting trouble.

Other Sectoral Weaknesses and Strengths and Private vs Public Investment

Speaking of consumers, the retail sector is another area where the negative turnaround in jobs has been sudden and steep. Combining retail and manufacturing job prospects, the outlook for transportation and warehousing employment can only be marked down some more as well.

Only in hospitality and leisure, health and education and government are the absolute levels of jobs staying relatively high. And even in those categories of employment, some cracks are starting to appear in the façade. Nevertheless, the outlook for investment from the public sector remains much more optimistic than from the private sector.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


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