AGC Predicts Modest Rise in Construction Employment in 2013

Of those firms surveyed in 30 states, 31 percent expect to add new staff this year while only 9 percent plan to make layoffs. The additions are likely to be modest with 79 percent of firms reporting they plan to hire 15 or fewer people and only 13 percent planning to hire more than 25 new workers. Maryland reports the highest hiring levels and the lowest are reported in South Carolina. In Michigan, 37 percent of firms are planning layoffs for 2013.

Contractors were optimistic about growth in private sector projects. Hospital and higher education construction are looking good with 36 percent of firms predicting spending on these projects will grow in 2013. Energy related construction is expected to increase in 2013. In some areas there has been dramatic increase in labor and construction activity due to shale and oil projects. Prospects for retail, warehousing, private office and manufacturing activity are mixed, with 23-26 percent expecting growth and 32-34 percent expecting a decline in activity. Tighter lending conditions have forced projects to be delayed for 40 percent of firms surveyed.

The public building market is looking dismal with 40 percent of those surveyed expecting a decline. Public infrastructure received mixed predictions. The two year federal extension on transportation funding may give a boost to some areas, but more funding is required to keep activity sustained. Likewise, water and sewer construction was predicted by 28 percent of those surveyed as decreasing and 25 percent as increasing in 2013.

The worst expectations were for airport and transit construction with 16 percent expecting an increase in activity and 34 percent predicting a drop. However, John Nunan, President of Unger Construction in Sacramento said in the AGC conference call that voters in California approved the construction of a high speed rail system which has been like “dollars from heaven” for contractors.

Demand for new construction equipment is likely to remain modest in 2013. More contractors are leasing equipment rather than buying, to avoid paying for idle equipment during lags in construction activity.

“Unfortunately, there are almost as many causes for concern as there are signs of optimism,” said Ken Simonson, the AGC’s chief economist. “Demand for public buildings is set to decline, manufacturing work appears to be slackening, materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”

“Given the pressures contractors are still facing, perhaps it isn’t too surprising that only 20 percent of firms say they expect the overall construction market to grow in 2013, while 46 percent don’t expect it to grow until 2015,” said Simonson. “In other words, 2013 should be a better year, but not a great year for most construction firms.”