Nonresidential Construction Recovery Slow, but Steady

The nation’s recovery from a devastating recession continues, but it remains a slow one for the nonresidential construction industry.

 Things will likely continue to get better in the upcoming months, but not even the recent upswing in residential home prices, job rates and other key economic indicators are enough to have resurrected the industry back to anywhere near the levels it enjoyed prior to the national economic crash that first began in late 2007.

That was the message this week from economic experts from Associated Builders and Contractors (ABC), the National Association of Home Builders (NAHB) and the American Institute of Architects (AIA) during a recent 2013 Mid-Year Construction Forecast. Kermit Baker, chief economist for AIA, David Crowe, chief economist for the NAHB, and Anirban Basu, chief economist for ABC, spoke in unison on their economic outlook for the nonresidential construction sector, the residential construction sector and the architecture professionals that design projects for both construction sectors.

“Expectations are good – not great – for construction activity in 2013 and 2014,” Baker said. “We are still dealing with some challenges.”

All three economists lauded America’s 16 consecutive quarters of economic growth that has helped pull the nation from the brink of economic collapse. The steady upward trend has seen residential housing prices rise nearly 10 percent nationally, while unemployment and foreclosure rates have also tailed off somewhat after hitting their nadir in 2009. Other positive key indicators include lower interest rates and the steady rise in both the home improvement and remodeling markets.

But the economic recovery has nonetheless been very slow to extend to the construction industry as antsy decision-makers capable of funding the job-creating construction projects needed to fully revive the industry remain wary, Basu said. As a result, the construction industry remains down nearly two million jobs from December 2007, according to the latest figures.

He likened the situation to sitting at a stoplight and awaiting the green for the okay to go.

“We’re stuck on yellow,” he said.

Basu estimated that the nonresidential industry is roughly nine months behind residential construction recovery.

He attributed much of the nonresidential industry’s slow recovery to the problems to a federal government that is saddled with an enormous debt that forced it to lay off 58,000 employees in during the recession. The ongoing sequestration and the likelihood of future debt ceiling battles with Congress have scared off the government from funding construction projects that it might have gladly taken on otherwise, he said.

Others in the nonresidential construction industry worry still about the possible effects any long-term immigration reform bill might have should it pass both houses of Congress and become law. Twenty-two percent of the industry’s employees are immigrants, Basu said.

It all likely means more of the same ahead.

“The next few months will be gradual improvement,” Basu said.

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