AGC Forecasts Increased Hiring in 2011

The results of a survey released by the Associated General Contractors of America (AGC) and Navigant find that more construction firms are planning to hire workers this year rather than lay off employees. The survey, conducted as part of the Construction Industry Hiring and Business Outlook, shows the construction industry may finally be emerging from a severe downturn that has left millions of skilled workers unemployed.

“This won't be an easy year for most firms, but it will be better than last year,” says Stephen Sandherr, AGC’s CEO. “If current trends continue, this industry will be in a much better position 12 months from now than it is today.”

Sandherr notes that while 55 percent of firms laid off staff and only 20 percent of firms added employees in 2010, the outlook is more positive for 2011. He says that 27 percent of construction firms report they plan to add staff in 2011, while only 20 percent report plan layoffs. More promising, the survey reports that expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

Despite the improving employment outlook, more contractors expect the construction market to shrink than grow in 2011. Contractors are most pessimistic about the private office market, where 56 percent expect activity to decline, followed by the retail, warehouse and lodging market, where 52 percent expect less activity.

Contractors are most optimistic about the hospital and higher education market, where 32 percent expect growth; and the power market, where 29 percent expect growth. However, even in these growing markets, 36 percent of contractors expect the hospital and higher education market to shrink and 32 percent expect the power market to contract.

Contractors' low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. The survey finds that clear majorities of firms expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30 percent of firms report they plan to perform stimulus-funded work this year, down from the 45 percent that reported performing stimulus-funded work in2009 or 2010.

“The stimulus propped up many construction jobs during the past two years,” says Ken Simonson, AGC’s chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. “The stimulus is already becoming a thing of the past in most contractors' minds.”

The dour market outlook appears to be affecting demand for new construction equipment. The report finds that only 28 percent of firms plan to purchase new construction equipment in 2011, down from 34 percent that reported purchasing equipment last year. Investment levels among firms planning to buy equipment appear to be heading up, however. Firms report plans to spend nearly $900,000 on average for new equipment, up from average totaling of $671,000 last year.

Bid levels will remain very competitive this year. According to the survey, 29 percent of firms say they plan to lower bid levels in 2011. That follows a year when 74 percent of firms reported lowering bid levels, including seven percent who reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms’ bottom lines, 71 percent of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.

“In the face of tough market conditions, many firms are focusing on operating efficiencies and expense reduction, positioning themselves well to take advantage of a resurgent construction market,” says Michael Feigin, Navigant’s managing director for construction. “Construction firms are doing this, in part, by adopting new technologies and new techniques like BIM (Building Information Modeling) and lean construction.”

A trend taking place is more firms embracing BIM, Feigin notes. While only eight percent of firms currently use the technology, 55 percent expect that number to increase in 2011. Demand for green construction also continues to grow, with 15 percent of firms reporting working on Leadership in Energy and Environmental Design registered projects in 2010 and 53 percent expecting that number to grow this year.

Forty-six percent of firms surveyed reported implementing Lean Construction Concepts, a way of minimizing waste of materials, time and effort. Feigin suggests many firms have embraced this practice to cope with decreasing revenue and ever tighter margins.

The outlook, which the association co-sponsored with expert services firm Navigant, was based on survey results from nearly 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico.

To view the full survey, click here: 2011 Construction Hiring and Business Outlook. (http://news.agc.org/wp-content/uploads/2011/01/Outlook-Report.pdf) 

Cdr.com