Good and bad signs ahead for construction, economist says

About $135 billion in federal economic-stimulus money is being pumped directly into construction projects.

That will do some good for the hard-hit construction industry, but it will take time, an economist for a national construction trade group said in Richmond yesterday.

"It is the largest-ever piece of legislation for construction," said Kenneth Simonson, chief economist of the Associated General Contractors of America. But even the so-called "shovel-ready" projects targeted by the stimulus take time to get going, Simonson said at a Richmond Association for Business Economics meeting.

Simonson also said he sees an improving outlook for single-family residential construction this year. Nonresidential projects, however, are heading into a contraction as building plans have slowed in response to the economy.

When the stimulus was passed in February, "people assumed that . . . you would see lots of jobs right away," he said. "The reality is, in most cases, states have needed a few months to obligate the money, to identify projects, and then they still have to give contractors time to prepare their bids."

The housing market bust and financial crisis hit construction especially hard. Only two states -- Louisiana and North Dakota -- had growth in construction employment from May 2008 to May 2009, Simonson said. Employment in the industry has declined 13.6 percent in the same period.

In Virginia, the construction sector lost about 33,400 jobs, a decline of almost 15 percent, from April 2008 to April 2009, according to a Virginia Employment Commission report this month. About 192,100 people were employed in construction in the state in April.

Simonson cited one study indicating that every $1 billion put into construction through stimulus spending would create or support 28,500 jobs.

With the federal stimulus providing an $8,000 tax credit for first-time home buyers, single-family residential construction "will see a turnaround," this year, he said. "Residential may wind up the year slightly positive, at worst only slightly negative."

But multifamily construction will remain weak through 2011, he said. And nonresidential construction, such as commercial building, is set for a "steep single-digit" contraction this year as ongoing projects conclude and developers scale back, he said. Exceptions could be health-care and energy-related work.

"How much so depends on how quickly that stimulus money turns into construction put in place," he said. "My guess is most of it won't be spent until next year."

Contact John Reid Blackwell at (804) 775-8123 or .