LOW TIDE

With projects postponed or halted, 2009 has been a difficult year for the construction industry in Wisconsin

As 2009 begins to come to a close, it doesn’t take too much thought for Jim Rossmeissl senior executive vice president at Boldt Construction to offer an accurate assessment of this past year.

“It was an abysmal year for the economy in general,” he says. “In that respect, 2009 wouldn’t be quite that bad for the construction industry since many companies have spent this past year working off backloads.”

From his own perspective, this calendar year has been an “okay” year for volume and “difficult” from a booking standpoint for Appleton-based Boldt, which is indicative of a larger problem at hand for the construction industry.

 “In general, our industry is one of the last to come out of a bad economy,” he says. “So while there may be signs of improvement, the recession is likely to affect the construction industry well into 2010.”

The effects, however, have already been felt throughout the state in both the commercial and residential construction segments.

“Wisconsin was certainly not immune to the multitude of forces that caused the downward trend in homebuilding due to loose lending practices, job loss and the personal spending freeze,” says Annie Rubens, Wisconsin Builders Association director of communications. “Many small business owners in the construction industry were forced to close their doors and lay off long term, even family member employees due to lack of work.”

But there is some good news. Rubens notes that housing demand, supported by the first-time home buyer tax credit, has shown some improvement since hitting bottom in January. That has also stopped the slide in home prices in some markets.

Nationally, single-family building permits in August were down 33 percent from 2008; Wisconsin was slightly below that at 31 percent.

At the very least, even successful companies have found 2009 to be challenging.

“Builders are very resilient,” notes WBA President Doug Scott. “And many have expanded their business to include remodeling as a way to expand their opportunities to gain customers.”

In commercial construction, Rossmeissl says that some market segments have fared better than others.

“Commercial construction, buildings for developers and manufacturing were all down this year,” he notes. “But other sectors weren’t quite as bad, such as power/energy and higher education.”

So is there some light at the end of the 2009 tunnel? Quite possibly, yes.

“In the past month, I feel like we’ve engaged with more clients who are discussing projects,” says Rossmeissl. “They’re dipping their toes back in the water … they’re not diving in yet, but there is some movement. I am sensing a little optimism and there is opportunity out there.”

His concerns rest on the fact that this recession may indeed include a “jobless recovery.”

“If that’s the case, I think the recovery will be temporary,” he hypothesizes. “It can’t be permanent – people need money to spend and if they don’t have that money, long-term I don’t think recovery can be sustained.”

Rossmeissl’s thoughts are echoed by National Association of Home Builders Chief Economist David Crowe.

“The economy does seem to be in the early phase of a recovery as government money from the stimulus package is just beginning to flow into the economy, sparking some spending,” he says. “Early indications are that overall output is on the rise, even as some parts of the economy continue to shed jobs. Unfortunately, job losses are still outstripping job gains, resulting in a net loss of jobs, and the outlook is for further job losses into early next year.”

He predicts that the lasting impact will be a recovery, albeit a fragile one for 2010, and Crowe is not alone. More than 80 percent of the economists responding to the National Association for Business Economics forecast believe that the recession is now over, although they generally expect the recovery to be slower than usual.

Retooling the industry

The Associated General Contractors of America unveiled a new plan in late September designed to revive the hardest hit sector of the economy, the nation's construction industry. The plan, “Build Now for the Future: A Blueprint for Economic Growth,” is designed to reverse predictions that construction activity will continue to shrink through 2010, crippling broader economic growth.

“The problems facing the construction industry aren’t just devastating construction workers, they are crippling our broader economy," says Stephen Sandherr, the association's chief executive officer. “Simply put, you can't fix our economy until you fix the construction industry.”

The mix of new incentives, tax cuts, policy revisions and infrastructure investments outlined in the plan are needed to stem the dramatic decline in construction activity and employment taking place nationwide, Sandherr says. He added that a new analysis of federal employment data conducted by the association found construction employment declined in 324 of 337 metropolitan areas between August 2008 and 2009.

Sandherr says the hardest hit area of the country was Reno-Sparks, Nev., which lost 35 percent of its construction workforce.

Following close behind was the Minnesota-Wisconsin Duluth region, which saw a 33 percent decline; Tucson, Ariz., which saw a 31 percent decline; Wenatchee, Wash., which saw a 30 percent decline; and Redding, Calif., which saw a 28 percent decline in its construction workforce.

He adds that communities that avoid declines in construction employment had little to celebrate. Taken together, the 13 areas saw a total increase in construction employment of 2,800 people. During the same time, the industry lost 1 million jobs, Sandherr adds.

Only one community saw a double-digit increase, Columbus, Ind., at 14 percent, Sandherr notes. Anderson, Ind., was next with a six-percent increase, followed by Tulsa, Okla.; Longview, Wash.; and Baton Rouge, La., all with a three-percent increase.

Sandherr says the recovery plan’s primary focus was on stimulating new private-sector construction activity, which accounts for 70 percent of the market. He said the plan calls for repealing the alternative minimum tax and increasing and extending a series of tax credits and cuts - including the net operating loss carry back and the 2001 and 2003 tax cuts — to boost investments in real estate development.

He adds that new incentives on global investment in real estate were needed to make it easier for international investors to put Americans back to work. And he said Congress should restore the President's “Fast Track” trade promotion authority and remove trade barriers to boost demand for new domestic manufacturing and shipping facilities.

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