This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - Jul 09, 2011

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Don’t count on debt limit deal to restart sustained high economic growth
Jim Haughey, RCD Chief Economist

Nothing being leaked from the negotiations suggests that the comfortable world of federal employees and check recipients is about the change in four weeks. There are no leaks about immediate massive layoffs, asset sales, service cuts or employee or entitlement benefits reductions. Unlike many state and local governments and many European governments, Washington has not accepted that creditors and taxpayers can force it to live within its means. Most of the energy expended in the negotiations is to find smoke and mirrors to present the illusion that the problem is solved.

Nonetheless the deal will include some near term (not 2011) spending cuts or tax increases which could as much as $50 Billion a year The most likely items for this package are the elimination of investment tax deductions for oil and gas companies, the redefinition of the income of hedge fund managers as ordinary income to be taxed at standard tax rates and slower growth in social security benefits by using a different version of the Consumer Price Index which has less inflation bias.

The remaining $150-350 Billion a year in tax increases or spending cuts will be undefined changes to be made by future Congresses. The accumulated debt will expand less quickly with this type of deal in place.  But is will still grow by as much as $1 Trillion a year in the next few years. The constraint on long term economic growth will remain so an even bigger debt/spending problem will have to be faced in 2013.

The construction consequence of subpar economic growth is a magnified slowdown in facility investment until existing surplus buildings are facilities are absorbed.

 


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Read Other Recent Jim Haughey Posts

08/15 - Contractor Survey: Work backlog rises in 2nd Q but may fall in the summer
08/09 - Modest construction recovery will be supported by two more years of cheap credit
07/29 - Sour economic growth report threatens construction recovery
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/19 - Housing starts rebound.6% in June after two weak months
07/18 - Congress prepares to postpone resolving the deficit crisis assuring an extended period of subpar eco
07/12 - House Transportation Committee proposes to keep federal highway funding at fuel tax receipt level
07/08 - Contractors cut 9,000 jobs in June
07/05 - The cost and frustration of selling a home contributes to the delayed housing recovery
07/05 - May construction spending down 0.6%; recovery still on hold
07/01 - FAA stops works on federally funded runway and control tower projects
06/21 - It is not more jobs that will quicken the economic recovery
06/16 - Mays’ 3.5% gain in housing starts does not signal a housing recovery immediately ahead
06/15 - Cautious spending threatens to delay construction recovery
06/10 - Economic and construction recoveries will be subpar for at least another year
06/09 - NYC construction unions may agree to drop expensive work rules to spur more work
06/04 - Contractors add 2,000 jobs in May; overall job gain disappointingly low
05/25 - No consensus for 2nd quarter GDP growth

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