Jobs report shows quick action needed to revive construction

October 3, 2008
COMMERCIAL, RETAIL, FABRICATION

The drop in construction employment accelerated in September and will get much worse unless credit markets reopen, said Ken Simonson, chief economist, The Associated General Contractors of America, Arlington, Va., in a Oct. 3 release. His comment followed a Bureau of Labor Statistics report that showed construction lost 35,000 jobs last month. “State governments from California to Maine have been shut out of the bond market, while developers have had bank credit windows slammed shut on their fingers as they reached for their loans.

“All types of construction shed workers in September, following an uptick in nonresidential hiring in August,” Simonson said, in the release. “Another ominous sign is that architectural and engineering services employment—a harbinger of demand for future construction—rose until recently but stalled this summer and fell in September.
 
These numbers only reflect payrolls as of Sept. 12, before the takeover of Fannie Mae and Freddie Mac triggered the current freeze in bank lending. “Unless Congress adopts a rescue plan immediately, the October report—due out just after election day—will be much uglier," Simonson said.
 
The bad news on employment comes on the heels of a report from the Census Bureau on Wednesday that private nonresidential construction spending fell by nearly 1 percent in both July and August, according to the release.
 
“State and local construction spending was up, but I fear that will change as more states each week announce budget shortfalls," Simonson said. "Highways and schools—60 percent of public construction spending—are in particular jeopardy, because of drops in fuel and property taxes."
 
Even the private categories with the best chance of growth in 2009, such as power plants, refineries, hospitals and higher education, have slowed and risk losing access to affordable loans, according to the release. “The 2009 construction employment and spending outlook will be very bleak unless credit markets revive promptly,” Simonson said, in the release.