Almost nine in 10 contractors believe there will be no recovery in 2010 as part of a new national construction hiring and business outlook forecast released by the Associated General Contractors of America. As a result, fewer contractors plan to purchase construction equipment and, after a year of near-record industry layoffs, many doubt they'll be able to hire new staff this year.
"Unfortunately for the industry and for our economy this year's construction outlook is far from positive," said Stephen E. Sandherr, the association's CEO. "As long as the construction industry remains mired in its own depression, broader economic and employment growth will continue to lag."
The outlook, which is based in part on survey responses from almost 700 construction firms submitted in late December and early January, shows that privately-funded construction activity is likely to decline even more this year.
As a result, the number of firms expecting to buy new equipment is down to 46% this year from 61% in 2009. Meanwhile, 81% of firms reported already having to cut profit margins in their bids just to stay competitive and another 10% said they are now submitting bids so low they will actually lose money on the projects.
Sandherr added that many construction firms are uncertain that they'll be able to add staff following a year of record layoffs. In 2009, 73% of firms said they laid off employees, averaging 39 layoffs per firm. For 2010, however, 60% of firms said they are unsure whether they will be able to add new staff, or be forced to make further cuts. "Perhaps they can't imagine who else to let go," Sandherr noted.
One of the relatively few bright spots for the industry was the federal stimulus. Thirty-one percent of contractors said they were awarded stimulus-funded projects. Of these, 46% said the stimulus helped them retain an average of 24 employees each. Another 15% said the stimulus helped them add an average of 10 new employees per company while 12% cited the stimulus as driving new equipment purchases.
Sandherr added that the stimulus is driving up expectations for publicly-funded construction activity in 2010. He noted that 62% of contractors expected the highway market to improve or remain stable.
"The stimulus is finally beginning to have a measurable, but limited, impact on the construction industry," Sandherr said. "The full impact of those investments has sadly been tempered by the inability of Congress to put a host of multi-year infrastructure funding plans in place."