Construction Industry Forecasts

Little change is expected in construction jobs, hours or wages until late this year.  The current surplus of construction labor will persist into 2012 and possibly beyond.

The slim 54,000 job added across the economy is the reason why. Economic growth has been clearly subpar so far in 2011. There was a spike in economic growth in April as the economy recovered from a harsh winter.  But this did not continue into May with the negative pressure on growth from higher energy and commodity prices, collapsing public spending and the manufacturing layoffs caused by the shortages of Japanese parts. So far the economic slowdown has shown up in reports for jobs, factory orders, factory production, consumer spending and consumer and business confidence.

The recent surge in commodity prices began to ebb in mid May and will be a lessening restraint on spending in June and through the summer.  The negative impact from Japanese factory shutdowns will worsen in June and perhaps July and then begin to ease. The cutbacks in public spending at the state and local will accelerate into the new fiscal year which begins July 1st.  Significant federal spending cuts are still ahead after Congress demand large and immediate cutbacks in exchange for a rise in the federal debt limit. So subpar economic growth will extend into the summer which will continue to weaken and delay the construction recovery.

The pattern of May job changes gives serious concern about near term growth in economic demand which is needed to generate added demand for building space and facilities. Both nondurable manufacturers and distribution cuts 5,000 jobs in response to a weakening in consumer spending reflected also in Consumer Confidence tumbling 6 points from an already low level. Local governments dropped 28,000 employees, largely due to state cutbacks in assistance to K-12 schools. Both of these trends are likely to persist for a few more months.