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Building Momentum? Survey Suggests Fewer Layoffs are Expected This Year

Tuesday, January 24, 2012

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U.S. construction companies plan to make fewer layoffs in 2012—with only 9% saying layoffs are likely, compared to 37% last year and 55% in 2010, according to an industry survey.

Also, many companies expect key private-sector market segments to expand this year, even as the overall industry outlook remains mixed, the Associated General Contractors of America and Computer Guidance Corp. said in the report.

AGC Survey

“While there are some promising signs, especially when it comes to construction employment, the outlook for the industry is mixed,” said Stephen E. Sandherr, CEO of AGC. “More than four years after demand for commercial construction began to plummet, economic conditions remain difficult.”

The survey was conducted as part of the organization’s 2012 Construction Industry Hiring and Business Outlook.

Layoffs Decline, Hiring Improves

In addition to fewer layoffs, 32% of companies report they plan to add new staff in 2012. “Even more positive, half of those firms report plans to add six or more new employees during the next 12 months,” AGC said.

Among the 29 states with large enough survey sample sizes, 57% of the companies in Wisconsin plan to hire new staff this year, more than in any other state. Only 16% of companies in Virginia plan to add staff this year, the lowest figure reported in any state.

Meanwhile, 18% of companies in Missouri plan layoffs for this year, the highest percentage of any state. No companies working in South Carolina reported plans for layoffs this year, the report said.
 
Public Sector vs. Private Sector

A majority of companies expect the dollar volume of projects they compete for to either grow or remain stable in every market segment. For example, nearly three-fourths of contractors expect the power, hospital and higher-education markets to expand or remain stable in 2012.

Contractors working on jobs typically funded by the public sector are more pessimistic, however, AGC said. Specifically, 44% of contractors expect the market for new public buildings to shrink, 41% expect the market for K-12 school construction to shrink, and 40% expect the highway market to contract, the survey said.

Credit Conditions Play Role

Many contractors also report they continue to be impacted by “tight credit conditions,” AGC said. Nearly half—49%—of responding companies report that tighter lending conditions have forced their customers to delay or cancel construction projects.

“Perhaps related to the tough credit environment, 60% of firms expect demand for green construction projects to either stagnate or decline in 2012,” AGC said.

AGC Survey

The AGC survey produced some conflicting trend indicators on contractor expectations for 2012, said Ken Simonson, the association’s chief economist.

 “The construction industry will improve this year, but we are going to have to wait until at least 2013 before contractors experience the kind of recovery this industry needs,” he said.

New Materials, Equipment and Technology Outlook

Simonson added that contractors appear “cautious with their plans for acquiring new construction equipment.” Many more companies report plans to lease, instead of purchase, new equipment. Only 40% of companies report they plan to buy new equipment this year, while 66% plan to lease.

“Even as they shift toward more leasing, firms’ appetite for new equipment remains modest, with 57% saying they will buy $250,000 or less in equipment and 70% saying they will lease $250,000 or less worth of equipment this year,” AGC said.

Contractors also report being caught between stagnant bid levels and rising materials prices.

For example, 86% of companies report they expect their materials prices to increase in 2012, even as 80% say they expect bid levels to stagnate or decline this year.

A growing number of companies appear to be focused on increasing efficiency and reducing costs by taking advantage of “Building Information Modeling” services, also known as BIM, association officials noted.

The survey reports that 31% of companies say they currently use the technology, up from 8% last year. Also, 47% report they expect the use of BIM to increase in 2012.

“As a result of the tight market conditions, firms are trying to find the best way to leverage their investments in new information technology,” said Roger Kirk, Computer Guidance Corp.’s president and CEO. “Contractors are looking for software and technology that increases the efficiency of existing staff and allows firms to do more with fewer people.”

Kirk noted that 55% of companies report they plan to invest in their information-technology departments in 2012. Moreover, interest in “Cloud-based” computing appears to be growing among construction companies, he said.

The survey defined Cloud-based computing as “internet-based computing to allow sharing of data processing, centralized data storage and computer services.”

About the Survey, Outlook

The report, which the AGC co-sponsored with Computer Guidance, was based on survey results from more than 1,300 construction companies from 50 states, the District of Columbia and Puerto Rico.  Contractors from every segment of the industry answered approximately 30 questions about their hiring, equipment purchasing and business plans.

Economists and specialists from the association and Computer Guidance analyzed those comments to craft the outlook, AGC said.

More information: 2012 Construction Hiring and Business Outlook reportsurvey results.


 

   

Tagged categories: Associated General Contractors; Associations; Commercial Construction; Commercial contractors; Construction; Contractors; Economy; Home builders; Industrial Contractors; Industry surveys; Market forecasts; Market research; Painters; Residential Construction; Residential contractors; Subcontractors

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