Plain Unvarnished Truth

By Ty Gable

While the 2009 unemployment figures were not available at this writing, we did learn in early December that the U.S. unemployment rate unexpectedly dropped 0.2 percent in November to 10 percent in the United States. In Canada, the rate dropped by 0.1 percent to 8.5 percent. Those numbers were considered good news indeed and an indication that the economy is on the road to recovery.

Not so fast, my friends. Lost in the hopeful news that the rate of job loss may be decreasing in the overall economy was the fact that unemployment actually increased in the  construction sector. While pundits and  government officials painted a rosy picture of an economy ready to  rebound, nearly 1 in 5 construction workers remained unemployed. That’s double the rate of the overall economy, and if you’re in the precast concrete business, you probably know some of those workers. If you’re an owner or general manager, you may have had to lay off some of those people. And guess what? The rate is probably higher.

Unemployment figures don’t count people who have basically given up looking for work. In the construction industry, some of the long-term unemployed have gone to part-time jobs. Some have started handymen repair businesses or are trying to make a buck at some other type of home-based business. We have no idea how many of these under-the-radar folks are out there, but it would no doubt bump the unemployment rate in construction to well past 20 percent.

Between November 2008 and April 2009, the construction industry shed 117,000 workers per month as companies went ugly early and started laying off workers in anticipation of leaner times ahead. We heard of one family-owned precast manufacturer that basically cut its staff in half – from 80 to 40 – in one bleak day toward the end of 2008. The hope was that by making the deep early cut they could survive through 2009 and beyond. Job losses slowed in the middle of 2009 to a rate of about 63,000 per month. In November, when construction unemployment rose to 19.4 percent, only 27,000 jobs were lost. Forgive us if we’re not happy about that.

The slowing rate of job loss can be interpreted in a number of ways – like all things in economics. You can look at the numbers and say, “Well, all that stimulus money going into construction must be working.” We believe it’s something else, based on a reading of the numbers and on anecdotal evidence from many precast concrete business owners. What’s really happening is that companies have trimmed to the bone. There are simply fewer workers left to layoff. Many companies are now just hanging on with their skeleton staffs, trying to wait it out in an industry that is likely to lag behind the rest of the country when it comes to pulling out of the Great Recession. Congress has been paralyzed by health care and will likely be bogged down by climate change legislation, which is not good news for anybody tied to the construction industry. The plain unvarnished truth is that the construction industry is not going to join in the recovery at the same pace as other sectors unless a few things happen. Here are three ways to help the country and help the industry get back to work:

1. Congress should pass a comprehensive transportation bill instead of kicking the can down the road by extending SAFETEA-LU for a few months at a time for the next couple years. You want to stimulate the construction industry, put people back to work and rebuild a seriously failing infrastructure, right? We don’t need to write a second version of the American Recovery and Reinvestment Act. We need to pass some version of the Surface Transportation Reauthorization Act that replaces SAFETEA-LU, which has officially expired and has already been extended twice.
2. Fix the funding formula for how we pay for transportation infrastructure. Revenue from the federal gas tax, which pays the bill for transportation, is based on gallons of gas sold. In a recession, people drive less. And, as consumers replace cars with more fuel-efficient vehicles, fewer gallons are consumed and the revenue decreases. The Obama administration does not want to raise the tax above its current 18.4 cents per gallon, so we’re looking at continuing revenue declines just when we need to raise more money. Raise the tax or change the formula so that it’s not tied to gallons sold.
3. The Clean Water Council, of which the National Precast Concrete Association is a member, recently completed a study in which it found that every $1 billion invested in water and wastewater infrastructure creates 27,000 jobs with average annual earnings of more than $50,000, increases national output (demand for all products and services) by $2.87 to $3.46 billion, generates more than $1 billion in personal spending and generates about $82.4 million in state and local tax revenue. And guess what? There are plenty of opportunities across the country, because the water and wastewater infrastructure is failing somewhere in practically every major municipality.

In short, any new government jobs bill or stimulus package needs to get beyond last year’s “shovel ready” projects and into some serious heavy construction that rebuilds our transportation and water infrastructure and puts people back to work. Because if you’re a laid off precast worker, the unemployment rate isn’t 19.4 percent in your family. It’s 100 percent. And we can do better.