December 3, 2008
Construction Industry Is Poised For A Rebound

The construction industry, beset by one of the biggest drops in employment in the current economic downturn, could be poised for a rebound under President-elect Barack Obama's expected stimulus package.

Mr. Obama hasn't offered details, but anticipating a surge in public-works spending, investors bid up construction and engineering stocks. URS Corp., a San Francisco-based engineering and construction company, rose 34%, global giant Fluor Corp. rose nearly 17% and Granite Construction Inc., a domestic engineering company, rose 22%.

Steven Fisher, an equity analyst for UBS in New York, said that 11 engineering firms he tracks had lost, on average, two-thirds of their market value this year through Friday as big construction projects were delayed due to state and local budget concerns. But Monday, share prices for that group rose by an average of 16%, far outperforming the broader market.

Stephen Sandherr, chief executive of the Associated General Contractors of America, a lobby for largely non-residential builders, said that a stimulus plan could "absolutely change the scenario for companies that have been talking about laying people off." His group's chief economist, Kenneth Simonson, noted that some 52,000 jobs in the heavy and civil engineering sector -- primarily highway projects -- have been lost in the past 16 months. Overall, construction had the highest unemployment rate, 10.8%, in October, he said.

As the housing market imploded, some companies that had focused on residential construction have been bidding on road projects, and bigger engineering firms have bid on smaller projects just to keep their work forces busy, industry officials said.

From highways to schools, state and local governments have been postponing approved construction projects in recent months. Assured funding would jump-start these projects. The American Association of State Highway and Transportation Officials, a group of state and local government officials, has a list of 3,109 "ready-to-go" highway projects that could break ground in 30 days to 90 days worth $18.4 billion.

Two former Clinton administration transit officials, Mortimer Downey and Jane Garvey, are among those spearheading transportation issues for the Obama transition. They have reached out to state and local officials to be ready for a spending package.

"What we've been told is to be ready, it's coming," says Christopher Ward, executive director of the bi-state Port Authority of New York and New Jersey. His agency has several infrastructure projects in planning, including a new rail tunnel connecting New Jersey and Manhattan that is seeking federal funds. That project would create 6,000 jobs, according to Mr. Ward. "Clearly we have the construction capacity to get shovels in the ground."

Robert Murray, economist at McGraw-Hill Construction, says "the general criticism is, by the time these stimulus packages are passed and implemented, the economy is already coming out of recession. But given the prolonged slowdown expected in 2009, if this package passed early next year, it has potential to be helpful."

Source: The Wall Street Journal, November 25, 2008

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Brought to you by the Steel Framing Alliance (SFA) on the first Wednesday of each month, Framework Online arms you with the latest news and commentary on the steel framing and construction industries. In addition to industry headlines, trends and project profiles, Framework Online provides information and ideas that will better enable members to increase their participation in the residential and commercial construction markets.