Construction Turnaround Forecast for 2011

By Richard Metcalf, Albuquerque Journal Staff Writer

Construction spending by the private sector is expected to turn around this year from what will likely be remembered as a historically bad 2010, in the process offsetting a downturn in public projects as federal stimulus funds are spent, the chief economist for the Associated General Contractors said Tuesday.

"I think nonresidential construction will rise by as much as 5 percent," Ken Simonson told a luncheon meeting of the AGC's New Mexico affiliate at the Indian Pueblo Cultural Center.  "Residential construction could see a 5 to 10 percent increase due to multifamily (apartment) construction."

The forecast of spending increases comes as the overall pace of construction spending has dropped from its peak of $1.2 trillion nationwide in March 2006 to $788 billion at the end of 2010, which Simonson described as "the lowest monthly total, seasonally adjusted, since July 2000."

Government spending on different types of public works projects was at or near their peaks at the end of 2010, but the stimulus funds being spent on those projects are expected to run out by the end of 2011.  Simonson noted the federal government still has 61 sources with $135 billion available for construction projects in 2011.

However a federal initiative to increase spending on rail transit around the country could have negative consequences for more traditional kinds of infrastructure projects like roads, airports and public utility systems.

"It's not clear who the losers will be," Simonson said.

As state and local governments gradually recover from their budget shortfalls, the emphasis will likely be on reinstating cutbacks in services, ending employee furloughs and increasing contributions to underfunded pension plans, Simonson said.

"That means construction is fourth on the priority list at best," he added.

At the state level, the construction slowdown has had a brutal impact on construction employment.

There were 44,400 people holding construction jobs in New Mexico as of December, roughly equal to the number of construction jobs in May 2000.  December's construction employment was down 2 percent from December 2009 and 26 percent from the state's peak in June 2007.

From a job perspective, Simonson said, "New Mexico hung on a little longer (than the country as a whole) and then had a precipitous drop from the good times."

Learn More

Associated General Contractors -AGC New Mexico hosted AGC of America Chief Economist Ken Simonson for the luncheon to discuss the key economic factors affecting the construction industry on Tuesday, February 15, 2011, at the Indian Pueblo Cultural Center. The event was co-sponsored by AGC New Mexico’s Construction Leadership Council (CLC) and the Construction Financial Management Association (CMFA). 


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