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Construction to Stabilize, Equipment to Stagnate, Report Says

Jan. 24 (Bloomberg) -- Unemployment in the construction industry, which hit 21 percent in December, should start to stabilize this year, while demand for related equipment will remain stagnant, an industry report said.

Twenty percent of construction companies plan to fire workers this year, compared with 55 percent who reduced their workforce in 2010, according to the Associated General Contractors of America, an industry group based in Arlington, Virginia. About 28 percent of firms plan to buy new equipment this year, compared with 34 percent in 2010, the association said today.

Firms that purchase equipment from companies including Caterpillar Inc., Terex Corp., CNH Global NV and Deere & Co. will spend an average of $880,000 on new machinery, compared with $672,000 last year, according to the report. About 50 percent of companies in the survey plan to rent or lease equipment valued at an average $719,000, compared with $674,000, the association said. Both United Rentals Inc. and Caterpillar have equipment-leasing businesses.

“Overall construction spending is down by $200 billion compared to 2008 levels,” said Stephen Sandherr, chief executive officer of the association, on a conference call today. “The challenges aren’t just hurting the construction industry, they are undermining broader economic growth.”

The industry benefitted from President Barack Obama’s 2009 stimulus package, according to the report. About 45 percent of respondents said they were awarded at least one stimulus-funded contract. One out of five construction workers were employed because of the $135 billion spent on infrastructure, the association said.

“A lot of stimulus money acted as a plug to the whole when states reduced infrastructure spending as the economy declined and tax revenue slowed,” Sandherr said.

The report reflects responses from 1,300 construction companies in 49 states, the District of Columbia and Puerto Rico.

To contact the reporter on this story: Carol Wolf in Washington at cwolf@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at Bkohn2@bloomberg.net

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