Building space and facility needs track population and income changes with a lag of a few months for housing and up to several years for large infrastructure projects. So the just released Census estimates of July 2008 state population provides an advance look at regional changes in construction activity in 2009-10.

Two states lost population in the last year. Not surprisingly, these were the two states with the highest unemployment rates. Michigan (9.6% unemployment rate) lost 46,368 people.109,257 (net) people who lived in Michigan in July 2007 had left by July 2008. Rhode Island (9.3% unemployment rate) lost 2,348 people. That a net outflow of people failed to lower the employment rate suggests that both of these state may suffer another population lost this year and an even higher unemployment rate. Surplus space and facility capacity is growing quickly in both states. Construction maintenance and renovation work is also likely being delayed. Both states have already announced cutbacks in public capital spending with more cutbacks almost certain unless Washington provides federal money for public works.

California has the next highest unemployment rate at 8.4%. Note that this overestimates the severity because the California unemployment rate has long had a sizable upward bias due to the nonstandard employment practices in the large entertainment and field crop industries where workers alternate between long hours and unemployment. Nonetheless, the California construction outlook in weakening quickly. Although the state population increased 1.0% in the last year, 144,061 July 2007 residents had left by July 2008, more than replaced by an even large number of foreign immigrants. The high unemployment rate and the changing population mix give California one of the most troubled state budgets. $5 billion of public construction work has been idled and Governor has mandated a 10% payroll cut in every state department. Surplus space accumulation has already begun.

Utah is now the fastest growing state with Arizona close behind. The population growth rate in Nevada has been halved from a few years ago. Utah is attracting a growing share of domestic and international immigrants but jumped into the population growth lead primarily because of its very high birth rate.

Outside of the mountain states and Texas, population growth is highest in the southeast: North Carolina (2.0%) and South Carolina and Georgia both growing 1.7%. These states continue to attract industry from more expensive Northeastern and Midwestern states and leisure & retirement immigrants who formerly went to Florida.

Note that Florida had a net outflow of domestic immigrants in the last year. It was small, 0.01%, 9,286 people. But this is a dramatic change from several decades of net migration to Florida from the rest of the country. The net outflow includes both unemployed construction workers leaving to seek work elsewhere and fewer retirees coming to Florida which is no longer a cheap destination. Together, the net population outflow and Florida’s unusually high 7.3% unemployment rate suggest that the Florida economy and construction market will worsen more than in the rest of the country in 2009.

Source: Census Bureau