AGC's Chief Economist Ken Simonson Provides NM Economic Outlook
New Mexico Business Weekly and Albuquerque Journal featured stories about economic outlook provided by AGC of America's Chief Economist Ken Simonson at the AGC New Mexico member luncheon on March 28th.
If you are a subsciber of Albuquerque Journal's online edition, link here to story "Good News on Construction" by Winthrop Quigley
Below please find the New Mexico Business Weekly story:
Simonson says woes of construction to continue by Steve Ginsberg, March 30, 2012
Reprinted with permission of New Mexico Business Weekly, copyright 2012
While the rest of the nation is showing recovery in construction job creation, New Mexico will continue to wallow in recession, noted Ken Simonson, chief economist for the Associated General Contractors.
Simonson told his tale of continuing woe March 28 at AGC-New Mexico’s annual economic outlook luncheon at Albuquerque’s Crowne Plaza Hotel. He said the state is especially vulnerable to federal budget cuts and high gas prices. That double whammy is likely to keep the Land of Enchantment a step behind the national construction jobs recovery. Simonson forecasts at least a 5 percent gain in construction spending nationally as multifamily apartments, oil and gas infrastructure and manufacturing expansion will fuel the national recovery.
“New Mexico is so heavily dependent on federal construction spending, and in 2011, most of the spending for base realignment came to a close at places like Kirtland and Holloman,” Simonson said. “The U.S. Economic Recovery Act projects were also wrapping, and the federal appropriations for the labs were cut. Federal spending is down nationally, but New Mexico really feels the brunt.”
High gasoline prices are another problem for the state. “High fuel costs are magnified in New Mexico because materials have to be trucked into the state from long distances. This could push some contractors out of business if prices continue to spike.”
Simonson said material costs have risen the past two months for items such as paint, gypsum, copper and wall board, but many contractors have yet to pass on their higher costs in their bids. He described that as an “ominous” sign for margins.
Since the recession started in 2006, the state has lost more than 20,000 construction jobs, dropping from more than 60,000 to more than 40,000. More recently, New Mexico dropped 3 percent from January 2011 to January 2012, while the nation grew 2 percent in construction job creation. The Albuquerque metro region has been the hardest hit, losing 12,500 jobs since 2006. It has 18,900 construction jobs, down from 31,400, according to the New Mexico Department of Workforce Solutions.
Despite Simonson’s gloomy forecast for the state, local contractors are not as dour. Larry Franken, president of AGC-New Mexico’s board of directors, says he is seeing a rebound in Bernalillo County, adding that the southern part of the state remains relatively strong.
“We might see a slight gain in construction jobs this year, and I don’t anticipate a series of layoffs. The competition for work is unprecedented, but how can our market get any softer? We can’t go much lower. We might see a few more [subcontractors] go under. In Bernalillo, there could be a rebound in housing, and that will create jobs,” Franken said.
He is president of Las Vegas, N.M.-based Franken Construction, where he has added a few employees this year. At 38 workers, he is down from 70 at the height of the market. Airport work in Las Vegas encouraged him to hire.
Ralph Baldwin, CEO of Enterprise Builders, said he is guardedly optimistic for the first time in two years. Private projects, not public spending, will drive any recovery, he observes.
“Private projects may be on the cusp of beginning again, but the price of gas is a big variable. Every time someone pulls up to the pump, they are voting with their pocketbooks,” Baldwin said. “Homebuilders are putting in infrastructure on tracts of land on the Westside, and they are a good crystal ball to the future. We still have a ways to go, and I see a a U-shaped recovery and not a V-shaped recovery.”
Enterprise recently completed the Department of Homeland Security’s Immigration and Customs Enforcement’s administration center at Mesa del Sol, a 75,000-square-foot building.
Vicki Mora, CEO of AGC-New Mexico, said the efforts by Albuquerque Mayor Richard Berry to update the Convention Center and get the Paseo del Norte interchange built are positive signs that inspire hope, but she’s hesitant to predict job growth for the industry statewide in 2012.