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Contractors Survey Predicts Fewer Layoffs in 2012

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Significantly fewer construction firms are planning to layoff employees in 2012 than at any point in the past few years—including AGC-member firms in both Utah and Colorado (see sidebar at the end of this story)—according to survey results recently released by the Associated General Contractors of America and Computer Guidance Corp. The survey, conducted as part of the 2012 Construction Industry Hiring and Business Outlook, shows many firms expect key private-sector market segments to expand this year even as the overall outlook remains mixed.

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

Sandherr noted that far fewer firms are planning on making layoffs this year, only 9% in 2012 compared with 37% last year and 55% in 2010. He added that 32% of firms 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.

Among the 29 states with large enough survey sample sizes, 57% of firms in Wisconsin plan to hire new staff this year, more than in any other state. Only 16% of firms in Virginia plan to add staff this year, the least amount in any state. Meanwhile, 18% of firms in Missouri plan layoffs for this year, the highest percentage of any state. No firms working in South Carolina reported plans to make layoffs this year.

A majority of firms expect the dollar volume of projects they compete for to either grow or remain stable in every market segment. In particular, roughly three-fourths of contractors expect the power and the hospital and higher education markets to expand or remain stable this year.

In contrast, contractors working on a number of market segments typically funded by the public sector are more pessimistic. Forty-four percent 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.

 In addition, many contractors report they continue to be impacted by tight credit conditions.

Nearly half – 49% – of responding firms 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.

“There are definitely some conflicting trends when it comes to contractors’ 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.”

Simonson added that contractors appear cautious with their plans for acquiring new construction equipment. Many more firms report plans to lease, instead of purchase, new equipment. Only 40% of firms 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.



Contractors also report being caught between stagnant bid levels and rising materials prices. Eighty-six percent of firms report they expect their materials prices to increase in 2012, even as 80% say they expect bid levels to stagnate or decline this year. Adding to the cost squeeze, 81% reported their health-care costs went up in 2011 and 82% expect their health-care costs to increase in 2012.

A growing number of firms 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. Thirty-one percent of firms report they currently use the technology, up from just 8% from last year. And 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 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.”

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