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 - Jan 16, 2009

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Obama asks for $135 billion in new construction funds
Jim Haughey, RCD Chief Economist

The proposed spending addition represents about an 8.5% boost in 2009 construction spending, excluding residential.  Assuming a much smaller stimulus plan, Reed Construction Data had estimated a 6-7% inflation adjusted drop in nonresidential construction spending in the first three quarters of 2009. If half of the construction stimulus funds are spent in 2009, capacity constraints and rapidly rising costs will return and be more serious than in late 2007 and early 2008.

But half will not be spent in 2009. For highways, the proposal is to boost 2009 spending by 17%.  This will not happen. The capacity does not exist.  It could only happen in congress fails to renew funding for the highway trust fund, adding at least 15% to cover excess cost increases since the last highway bill. For labs, the proposal calls for adding $3.4 billion in spending in 2009-10.  This is nearly a 50% boost since the total value of lab construction starts in 2008 was $3.8 billion. $27 billion in federal projects would have to be managed by the Corps of Engineers which is already behind schedule preparing work for bids.

The program is simply a laundry list of all the projects that did not get in the current federal capital budget. Expect the list to be cut back substantially when it meets objections that much, perhaps most, of the money will not be spent until the recession is over.

The forty-one items on the list have one characteristic in common.  Apart from the federal projects, it appears that the owners of buildings and facilities can get some of the money by applying to Obama who will decide who is worthy.  We all know how long it takes to divide up the spoils in Washington.

Economic Stimulus II 2009-10 (buildings and facilities — $B)
Highway30.00 Flood control Facilities0.62
K-12 & college buildings20.00 Lab - NSF subsidized0.60
Electricity grid11.00 Building energy efficiency- industrial0.50
Water treatment facilities9.50 Lab - NIH subsidized0.50
Renewable power generation8.00 Bureau of Reclamation water facilities0.50
Building energy efficiency- local6.90 Nuclear waste facilities0.50
Building energy efficiency- federal6.70 Bureau of Indian affairs buildings0.50
Building energy efficiency- low income families6.20 Lab - Center for Disease Control0.46
DOD- housing5.56 DOD - Guard/reserve buildings0.40
Corps conservation and development4.50 NOAA habitat construction0.40
Federal park facilities3.10 DOD- child care facilities0.36
Airport facilities3.00 Lab - NIST (COMMERCE DEPT)0.30
Building energy efficiency- public housing2.50 Job training center buildings0.30
DOD- facilities2.10 Clean up closed military bases0.30
Building energy efficiency- institutional1.50 Federal buildings - USDA0.21
Lab - university1.50 Federal buildings - USGS0.20
Border Patrol buildings1.15 National Mall renovation0.20
Amtrack Facilities1.10 Replace leaking fuel tanks0.20
Transit Facilities1.00 Remove/repair Bridges -Coast Guard0.15
VA hospital buildings0.90 Smithionian renovation0.15
Superfund site cleanups0.80 Industrial facility clean up0.10
Total134.46 
NR building subtotal55.23 
Residential building subtotal14.26 
Building subtotal69.49 
Facility Subtotal64.97 

Source: House Appropriations Committee


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Member Comments

Posted by Marcyan
01/17/2009
I have been reading your blog since Sept '08. I appreciate your work and look forward to reading your posts. Thanks.
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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
07/09 - Don’t count on debt limit deal to restart sustained high economic growth
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

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