Jobs Key to Sustained Construction Industry Recovery

Economists from Associated Builders and Contractors (ABC), the American Institute of Architects (AIA) and the National Association of Home Builders (NAHB) gave their perspectives on where the construction economy is headed during a June 17 online news conference. As a whole, the economic climate is improving but recovery will continue to be slow unless more jobs are created.

2013 Mid-Year Construction Outlook Calls for Modest Continued Growth 

During the conference, ABC Chief Economist Anirban Basu noted that the outlook for nonresidential construction is a “mixed bag.” While the nation will enter its fifth year of recovery in July, the nonresidential construction upturn is still weak. He cited the quarterly ABC Construction Backlog Indicator, which has fallen to 7.9 months of backlog (down from the last two quarters of 2012) and the net 22.5 percent of construction industry jobs lost during the recession.

“No industry was hit as hard as construction, and this has created a number of issues,” Basu said. “Given how far nonresidential construction activity has fallen, if you look at it from the perspective of rebounding from the downturn, it is a really slow rebound.”

David Crowe, chief economist with the NAHB, brought good news into the mix, as housing prices have risen 10 percent this year. The residential side of the industry is looking up, particularly in terms of sales in new construction. Crowe also pointed out that until the jobs numbers increase, the recovery in the commercial sector is expected to be slow.

“There has been a general softness in this recovery for a lot of reasons. The only recovery that was worse in terms of growth in employment was the one of 2001 and, of course, that was such a mild recession that it didn’t have much to grow out of,” Crowe said. “You can see there is a lag in terms of employment as one of the indicators of just how slow we’ve taken to get out of the recession.”

AIA Chief Economist Kermit Baker confirmed house prices are beginning to turn up as the foreclosure crisis winds down. On the nonresidential side, major construction sectors are generally positive and point to further growth; however, expectations for 2013 and 2014 are “good, but not great.”

Baker also cited the AIA Architecture Billings Index, saying, “It is as healthy as it has been in years and, since this index leads construction activity by nine to 12 months, we are expecting a further improvement in construction activity moving forward. However, until we see better jobs numbers, until we see stronger growth in the broader economy, the construction recovery is likely to remain relatively muted.”

View an archived version of this news conference

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