On the Lookout for Effective Government Stimulus

After a long snow-filled grey winter, spring is a time of firsts − robin sightings, thunderstorms and new growth everywhere. On a getting-down-to-business level, economy-watchers are poised for the first signs of government infrastructure stimulus. Most of whatever action there will be in construction will be initiated by the public sector. Rather than waking up with spring, the private sector has gone dormant.

Privately-financed construction activity this year will be a wash-out. Poor employment prospects and weak consumer spending are causing reduced retail sales, low production levels and higher office vacancy rates. Add to these problems, the talk of a possible swine flu pandemic. Reduced tourism trade will now compound difficulties for an accommodation sector that was already hit by recession-induced business travel declines.

Therefore, the public sector needs to come through. According to normal construction time lines, activity levels in the design professions should be an indication of first sparks of life, certainly before job-site labour buildups. However, one factor to keep in mind is that the earliest government projects will be ones that are "shelf-ready". These will be dusted-off projects that have already been planned and designed and that really only need go-aheads. For this reason, the design professions might not get involved right away.

The involvement of the design professions depends on the mix of construction work. As set out above, start-ups on office buildings, stores, warehouses, hotels, and industrial plants will languish through this year and well into next year. School, hospital, bridge, roadbuilding and utility work is where the action will be. Consulting firms that can adjust their project mix will be the ones with the best chance of surviving and prospering. (story continued below)

This chart shows SEPH results (Survey on Employment, Payroll and Hours).
It is an employer-based survey which makes use of payroll data. SEPH is generally considered better for detailed industry measurements than the LFS (Labour Force Survey).
SEPH has data on employees and the self-employed who pay themselves a salary.

Data source (not seasonally adjusted): Statistics Canada.
Chart: Reed Construction Data — CanaData.

This chart shows SEPH results (Survey on Employment, Payroll and Hours).
It is an employer-based survey which makes use of payroll data. SEPH is generally considered better for detailed industry measurements than the LFS (Labour Force Survey).
SEPH has data on employees and the self-employed who pay themselves a salary.

Data source (not seasonally adjusted): Statistics Canada.
Chart: Reed Construction Data — CanaData.

Canada
In Canada, the design professions were still adding to their workforces through January, the latest month for which data is available. That was before the worse-than-expected deterioration in the economy set in. However, it was also ahead of the announced push on infrastructure projects contained in the federal budget and subsequent provincial budgets. So far, there has been no fall-off in design profession work comparable to what happened in 1992 and late 2001.

United States
In the United States, employment levels, both in the design community (-5.1% year over year) and at civil and engineering construction job sites (-8.4% year over year), are still headed in only one direction, sharply downward. There will have to be halts to these steep dives before much optimism can be generated about a turnaround being underway.

Data source (seasonally adjusted): Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor).
Chart: Reed Construction Data — CanaData.

Data source (seasonally adjusted): Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor).
Chart: Reed Construction Data — CanaData.