Economist not optimistic about construction
Maine is faring better than many states in the speed it has awarded stimulus funds to construction projects, but that was about the only good news economist Ken Simonson had to share at yesterday's meeting in Portland of the Maine Chapter of the Associated General Contractors.
With apologies to host John O'Dea and the 30 or so members of the chapter who turned out to listen to Simonson, chief economist with AGC of America, there was little good news to share in an industry that has been hit hard by job losses and a tight credit market.
"I was in Colorado recently where 69% of stimulus money for highways has been awarded ... and in New Mexico, it's about 80%," Simonson said. "But Maine is up to 100% I learned, so congratulations on getting your stimulus money out the way it was intended."
The $135 billion earmarked for shovel-ready projects by the massive American Recovery and Reinvestment Act was intended to spur jobs, and do it quickly. Maine has lost about 12% of its construction jobs between June 2008 and June 2009, slightly below the national average of 13%.
Construction employment in Maine peaked in April 2006, fueled by residential, commercial, retail and industrial projects that were in high gear. Simonson said Sept. 15, 2008 was the date when everything started to fall apart, as financial markets teetered on the news of a nearly bankrupt Fannie Mae and Freddie Mac that prompted banks to stop lending while they searched for new capital.
Compared to its peak, Maine has lost 19% of its construction jobs, down to 25,800 workers. A slight upside: Because of last year's relative health, many construction companies gave raises, bringing the average annual pay of a construction worker to $40,300, 13% more than the average for all private sectors in Maine, Simonson said. The average annual pay nationally for construction workers is $49,000.
There are some indicators that the housing market has begun a slow turnaround, measured by an increase in building permits for single family homes, encouraged by tax credits and low-interest mortgages. But it's not a trend in the multi-housing market, nor commercial and industrial markets, which have stalled, he said. Thanks to stimulus funding, spending on public works-related projects will likely match 2008 levels, but privately financed developments are expected to stay well below 2008 numbers, said Simonson.
Power and energy projects will likely stay healthy, helped by the $11 billion in stimulus funding designated for grid projects nationally, and Simonson predicted some increased activity in institutional projects.
"Now that the stock market has rebounded somewhat, endowments and capital campaigns are likely to get back on track for next year," he said.
Prices for construction materials have moderated, reflecting about a 4% drop from 2008 prices, but Simonson warned that it was most likely "a limited time sale" as economies in China, India and other developing companies could cause a run-up as they did previously.
His advice to Maine contractors was to consider out-of-state projects, as Reed & Reed recently did in its bid to build a $10 million Massachusetts wind farm, and consider stimulus projects that have yet to be awarded such as high-speed rail.
"But your fate is dependent, in part, on the state's economy as a whole," he said. "I can't say I'm optimistic about the outlook for state and locally funded projects."
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