Timberline Forum

The construction industry continues to hold the unhappy distinction of having THE highest unemployment rate. Last month that rate rose even higher to 18.2%, for the month of July that’s decidedly up from 17.4% in June.

According to the latest release from the Bureau of Labor Statistics the construction industry lost another 76,000 jobs in July compared to an average of 73,000 over the previous three months. So far 1.3 million construction jobs have been lost since the recession began.

The current construction unemployment rate is now double that of the country’s overall unemployment rate which stands at 9.4%.

To review all of the BLS statistic, go here.

It’s being called the longest recession since the Great Depression. It looks as though economists all concur – we’re coming out of the recession What is not so sure is just how long before we slip BACK into one!

One J.P. Morgan economist predicts “growth wouldn’t be robust enough to halt the rising unemployment rate, which he projects could go up from its June rate of 9.5 percent to around 10 percent. The jobless rate might begin to fall by next spring or early next summer. That means that the next year is unlikely to feel much like a recovery, and it’ll be about 12 more months before Americans begin to feel secure about their jobs.”

Another economist says “There won’t be enough job growth until 2011 to meaningfully reduce unemployment. It will be a slog.”

Yet another claims, “By next year, the Obama administration and the Fed may have to choose between higher inflation and fewer jobs.”

While this news is less than heart-warming, it is nice to know that at least for now, things are looking up which will make facing future downturns a little easier to stomach. It won’t be one long continuous financial death march for those of us struggling to get through.

To read the Tools of the Trade Online I heavily quoted from please click here.

Industry experts were quick on the draw after the Associated Press released its assessment of the more than 5,500 stimulus transportation projects being planned throughout the country. It looked at how states planned to spend the first installment of highway money granted by the stimulus. The AP followed the money trail and reported some eyebrow-raising findings. The AP reports states are planning to spend 50 percent more per person in areas with the lowest unemployment rather than in those that have the highest.

BUT Ken Simonson, Chief Economist for the Associated General Contractors of America, had plenty to say about the AP’s findings. FIRST of all, he pointed out, “The intent of the infrastructure portion of the stimulus was clear; put construction workers back on the job. So far as early reports from our members make clear, the stimulus’ transportation investments are doing just that.”  Simonson went on to say that construction workers are nomadic. They go where the work is and so it is highly likely that those from places where unemployment is highest might be the ones actually working in the lower unemployment areas. They will then take their wages back home and inject it into their local economy.

Another consideration, materials like concrete and steel are made somewhere else so even though the jobs may not be in the high unemployment areas the materials needed to build the projects may be coming from highly-impacted areas. That would put money in the pockets of those who make the materials as well as those who ship them.

Simonson also pointed out “the Associated Press analysis fails to take into account the significantly higher unemployment levels within the construction sector than the rest of the economy. Construction unemployment is now nearing 19 percent, while the overall U.S. unemployment rate remains below 9 percent. As a result, even in counties where overall unemployment may be low, construction unemployment may be significantly, and surprisingly, higher.”

The Transportation Department responded by saying it will review the AP’s findings and see if they can duplicate them. It will also continue to pressure states to give the money to those most in need.

For a list of construction companies already benefitting from stimulus funding click here.

Conventioneers heard some pretty optimistic news about the nature of the construction economy. Those who recently attended the Institute for Scrap Recycling Industries (ISRI) 2009 convention in Las Vegas heard from top economists. Ken Simonson. Bill O’Neill. Brian Westbury. If you don’t their names it’s okay. What you really need to know is what they had to say.

Ken Simonson, Associated General Contractors of America’s Chief Economist, said he expects to see second quarter U.S. growth, and described the recession as a checkmark with the worst behind us. That aligns itself to what others across the country are saying. The economy is bottoming out, on that most agree. What they don’t agree on his how long it’s going to take to surge ahead. Many believe it will be a painfully slow but steady return.

Long-time commodities economist, Bill O’Neill of LOGIC Advisors, told the convention-goers, “We are in a bottoming process, but I think it is a swimming pool bottom that comes down sharply, extends along the bottom and then we’ll have a surge.”

O’Neill goes on to say there is a lot of psychology in what is happening now. People are afraid to spend. Fear has crippled many of them and adds that the current 5 percent personal spending rate is “a fear-based rate”. He also predicts the U.S. housing market will recover before the second quarter of 2010.

Chief economist at First Trust Advisors, Brian Westbury, told the crowd he has a very optimistic view of the economy. “The economy is turning the corner very quickly and we’re going to be shocked at how rapidly things pick up from here. I think in the second half we’re going to see the U.S. GDP up at a 3.5 percent annual rate.”

To read more of what the three economists had to say click here.