By: Roads & Bridges
A few in the highway and bridge industry were able to take that trip they always wanted to take in 2008. Most, however, were forced to make the one they have forever dreaded.
Wages were actually on the rise in nonresidential construction this year, but the loss of jobs sucked much of the energy out of the market. Unemployment lines were the longest since September 1998.
“Employment will continue to go down [in 2009], and I think we will see considerable weakness in the nonresidential markets,” Kenneth Simonson, chief economist for the Associated General Contractors of America, told Roads & Bridges.
According to The Data DIGest, a market conditions report released by Simonson, seasonally adjusted nonfarm payroll employment fell by 240,000 in October, with the unemployment rate reaching 6.5%. About 179,000 more jobs died in August and September than was estimated, and over the past year more than 1 million have been lost.
Construction accounted for nearly half of those losses—508,000—and the one sector hit the hardest, according to Simonson, was the road and bridge construction market. Employment in September totaled 371,000, down 9% from a peak in September 2005 and the lowest since September 1998.
Numbers from the economic analyst report released by the American Road & Transportation Builders Association show employment down in highways (61%), airports (50%) and bridgework (52%) in the third quarter of 2008. Profit margins also were reported down in all three areas.
However, average hourly earnings in construction elevated to $22.14 in October, and the forecast for the coming year shows at least a 3-4% increase. In addition, the road and bridge industry is still yearning for those skilled equipment operators and other specialized workers.
The market is currently being conditioned for a rebound. Material prices are starting to fall. Part of that is because the world economy is cooling off, decreasing the demand, but the U.S. economy also has turned grizzly over the last two quarters of 2008, resulting in a decline in crude oil prices. With the average now sitting at around $60 a barrel, the cost to do business has gone down dramatically. Along with diesel fuel, asphalt prices also have dipped.
“I would be surprised that we would have the same kind of price increases [in 2009] that hit in 2008,” said Simonson.
Simonson sees the price per barrel of oil staying at $60 for much of 2009, but supplies could still be tight. A polymer modifier shortage struck some regions in the U.S. in July and August, but the problem is not expected to intensify next year.
Steel prices also should continue to drop, but the new administration could decide to impose tariffs, which would reverse the trend.
“There seems to be a huge amount of capacity all of a sudden,” said Simonson. “I am worried about repeated intervention in the steel market by both Democratic and Republican administrations, but for now they should accelerate the downward course they started in August.”
Cement consumption might remain down, but prices also should continue to lower in 2009 thanks to the addition of the largest cement plant ever to be constructed in the U.S. in St. Genevieve, Mo. On the flip side, however, is the cost of aggregate. Most markets contain a limited number of producers, driving the price up, and many quarries are still passing along the increased cost in producing the stone.
