State budgets, IP sink.
President Obama signed the American Recovery and Reinvestment Act Feb.
17. AGC estimates that the act
includes $135-144 billion for construction, most of which must be obligated by
Sept. 30, 2010. (Missouri announced it had awarded a bridge project a few
minutes after the bill became law.) That total covers the following (in billions):
- Transportation, $49 ($28
highways; $18 transit/rail; $2 airports)
- Water/environment, $21 ($6
nuclear waste; $7 water/wastewater; $5 Corps of Engineers)
- Buildings,
$30-$38 ($7 Department of Defense; $6 General Services Administration; $9 other
federal; $8 housing; $0-9 schools/other local)
- Energy/technology, $30
($11 “smart grid”; $7 wireless/ broadband; $6 energy grants; $5 weatherization)
In
addition, numerous tax provisions should add to demand for construction: “qualified”
school construction bonds; “Build America” bonds; bonds for “recovery zones,”
tribal areas, renewable energy, energy conservation; and modified renewable
energy, conservation credits.
Other tax cuts will help
contractors directly: higher limits on the size of total investment and amount
of equipment eligible for expensing; a continuation of “bonus” depreciation; an
increase in the carryback period for net operating losses from two to five years
for small businesses with less than $15 million in gross receipts; and a delay
from 2011 to 2012 in the start of 3% withholding on government contracts.
AGC
has posted detailed information about amounts, distribution formulas and
timetables, state-by-state allocations where available, and limitations at
www.agc.org/stimulus. AGC encourages
contractors and suppliers of construction services, materials and equipment to
submit examples of jobs saved or created by stimulus projects, and to report
cases where stimulus funds are not being awarded timely or appropriately.
The stimulus money may not fully offset cuts in state budgets, however. “At least
46 states faced or are facing shortfalls in their budgets for this and/or next
year, and severe fiscal problems are highly likely to continue into the
following year as well,” the Center on Budget and Policy Priorities reported Feb.
10. “Combined budget gaps for the remainder of this fiscal year [FY] and
state [FY] 2010 and 2011 are estimated to total more than $350 billion.”
The Northern Virginia
Transportation Alliance reported yesterday that on Friday, “the Commonwealth
Transportation Board approved a mid-year reduction of the FY 2009-2014 Six-Year
Improvement Program (SYIP) that resulted in highway funds being reduced from
$7.9 billion to $6.0 billion. Transit funding increased by $200 million over
the amount approved in June 2008. Overall, the revised $8.9 billion FY
2009-2014 SYIP is $2.6 billion less than the previous FY2008-2013 SYIP.”
Recent reports underscored the importance of
stimulus in the absence of other demand for construction. The Federal
Reserve reported today that industrial
production (IP) in manufacturing sagged
2.5% in January, seasonally adjusted, and 13% from a year ago. IP in
manufacturing of construction supplies shrank 3.4% and 17%. The Fed noted,
“The factory operating rate moved
down 1.7 percentage points, to 68.0%, the lowest rate of utilization since this
series began in 1948.” Factory capacity
utilization is one indicator of demand for manufacturing construction.
The architecture billings index, which
measures the percentage of architecture firms with higher or lower billings
compared to the prior month, “dropped to a historic low level in January,” the
American Institute of Architects reported today. The subindex reflecting
billings by firms with commercial/industrial practices moved up slightly from
the record lows of the previous three months, but the institutional- and
mixed-practice measures hit new lows and the residential-practice subindex tied
the low set in December. The index dates back to 1995.
Reed Construction Data reported that the January
2009 value of construction starts
compiled by the firm rose 5.3% from January 2008 but was 23% lower than in
December, “an unusually large cutback. The only similar drop in recent years
was in September 2005 and that was reversed the following month,” Chief
Economist
Jim Haughey commented. “Heavy-project starts fell
13% in January (month over month), although starts increased slightly for
highways as public works managers took advantage of suddenly more competitive
bidding and plunging asphalt prices. Commercial starts declined 23%....Institutional
starts declined 28% [albeit] from an exceptionally high December total. The
commercial market is still significantly weaker than the institutional market.”
Housing
starts and permits fell for the seventh straight month in January, the Census
Bureau reported today. Starts fell 17% to a seasonally adjusted annual
rate of 466,000 units, while permits for new housing construction fell 4.8% to
a rate of 521,000 units-both record lows for the 50-year-old series.
Single-family starts fell 12% from a month ago and 50% from January 2008.
Multifamily starts were down 28% and 62%. Single-family permits dropped 8.0%
and 50%; multifamily permits climbed 1.6% from December but tumbled 51% from a
year earlier.
“Extended mass layoff events [lasting 31 days or more] and
separations reached their highest levels in program history (with data
available back to 1995),” the Bureau of Labor Statistics reported on Friday. “Construction firms recorded 843 extended
mass layoff events and 100,922 separations, the highest levels for the industry
on record. While most construction layoff events were due to the end of
seasonal work and the completion of contracts, the number of layoff events due to
slack work/insufficient demand more than doubled over the year.”
