The rate of decline in overall employment is gradually slowing. First-time unemployment claims dropped in mid-September, suggesting that September employment losses will shrink again, as they did in August.However, construction-particularly nonresidential construction-continues to hemorrhage jobs. Only two states-North Dakota and Louisiana-added construction jobs between August 2008 and August 2009, the Bureau of Labor Statistics (BLS) reported on September 18. From July to August, seasonally adjusted construction employment rose in 16 states, an improvement over the 12 states that added jobs from June to July. (Seasonal adjustment takes into account variations due to weather and differing numbers of work days.)State-level data are not broken out between types of contractors, but national data suggest that residential construction is slowly improving while nonresidential continues to deteriorate. A September 23 BLS report on mass layoff events-involving 50 or more workers from a single employer-listed construction first among seven major industry sectors that experienced the largest number of August initial layoffs. "Construction accounted for 11 percent of [layoff] events and 10 percent of initial claims [from newly laid-off workers], an increase from 10 percent of events and 7 percent of claims in August 2008," BLS reported. Initial claims jumped 23 percent in construction compared to August 2008, while dropping 13 percent in all other industries combined.More federal stimulus funds should reach contractors in coming months as agencies belatedly ramp up contract awards. But the increase is unlikely to offset continued shrinkage in private and state and local government-funded projects. Many contractors report dwindling backlogs and fierce competition for what work does appear. Meanwhile, bank financing remains difficult, if not impossible, to obtain for developers.To report changes in market conditions, favorable or not, write simonsonk@agc.org.

"Reports from the 12 Federal Reserve Districts indicate that economic activity continued to stabilize in July and August," the Fed reported on September 9 in the latest Beige Book, a summary of informal soundings of business conditions. The districts are referred to by the name of their headquarters city. "Relative to the last report, Dallas indicated that economic activity had firmed, while Boston, Cleveland, Philadelphia, Richmond, and San Francisco mentioned signs of improvement. Atlanta, Chicago, Kansas City, Minneapolis, and New York generally described economic activity as stable or showing signs of stabilization; St. Louis remarked that the pace of decline appeared to be moderating. Most Districts noted that the outlook for economic activity among their business contacts remained cautiously positive."The Beige Book was also a bit more upbeat about homebuilding but not about conditions in nonresidential construction and real estate. Residential "construction remained at low levels overall, although Chicago and Dallas reported a small increase in activity. Reports on commercial real estate markets indicated that demand for space remained weak and that construction continued to decline in all Districts. Atlanta, Philadelphia, Richmond, and San Francisco reported that vacancy rates increased, while rates held steady in the Boston and Kansas City Districts and were mixed in New York. Boston, Dallas, Kansas City, Philadelphia, and Richmond commented that the demand for space remained weak. Commercial rents declined according to Boston, Chicago, New York, Philadelphia, and Richmond. Rent concessions were reported in the Richmond and San Francisco markets, and Richmond noted that some landlords had postponed property improvements in an effort to conserve cash. Construction remained at very low levels, with modest improvements noted in public construction in the Chicago, Cleveland, and Minneapolis Districts."The reports are consistent with what nonresidential contractors have been telling AGC: outside of stimulus money for highway construction and a few other niches, conditions have not brightened at all.To report what you are encountering, email simonsonk@agc.org.

An article in the San Antonio Express-News covered AGC chief economist Ken Simonson's recent visit to the Federal Reserve Bank of Dallas.  During his presentation, Simonson announced he expected new single-family housing construction to rise this year, but could not make the same prediction for multifamily construction.

AGC members continue to report that developers are unable to get loans for commercial real-estate (CRE) projects, and many members have had their own lines of credit tightened or canceled. These observations match the latest survey of senior loan officers by the Federal Reserve, which the Fed summarized on August 17.The Fed reported that, out of 55 large domestic banks and 23 branches and agencies of foreign banks, "The fraction of domestic respondents that reported tightening standards on CRE loans fell to about 45 percent, compared with 65 percent in April. Still, this fraction is higher than that reported for [commercial and industrial] loans and all consumer lending categories except nontraditional residential mortgages. About 45 percent of foreign banks also reported tightening standards on CRE loans, a slight increase from the figure reported in April. The net percentage of domestic respondents that reported weaker demand for CRE loans fell slightly-to roughly 65 percent-but it remained large by historical standards and relative to other loan categories. About 45 percent of foreign respondents also reported weaker demand, a slight increase from the April survey."Ominously, "With respect to CRE lending standards, nearly all banks indicated that current standards were tighter than their longer-term average levels. Around 40 percent expected standards to return to longer-term average levels by the second half of 2010 or in 2011 for both investment-grade and non-investment-grade lending. However, 40 percent indicated that standards for investment-grade CRE lending would remain tighter than their longer-term average levels for the foreseeable future, and about 55 percent expected this outcome for non-investment-grade CRE loans."High and rising vacancy rates for office, retail and warehouse space and low occupancy rates for hotels make most developer-financed properties a risky bet. Nevertheless, some developers have projects that would be able to pay off loans, yet have been unable to qualify under current lending standards.AGC will form a task force to examine whether any additional government programs are warranted to improve the flow of funds to worthy commercial real-estate projects. To volunteer for the task force or submit your ideas for what to do, email simonsonk@agc.org.

Downturns in multi-family construction and both private and public nonresidential construction swamped a strong upswing in single-family homebuilding in July, according to AGC's analysis of federal construction spending data released Tuesday by the U.S. Census Bureau.

The amount of construction work funded by the American Recovery and Reinvestment Act (ARRA, popularly called the stimulus legislation) varies greatly by state and program. Two weeks ago, I spoke on successive days to state transportation officials in Colorado, New Mexico and Maine. They said they had awarded contracts covering 69%, 80% and 100% of their respective DOT allocations. But, of course, those percentages don't necessarily correspond to amounts paid out or even work started. Other states are far behind those three in even holding bid-letting days to pick contractors.Meanwhile, the only contractors in those states who reported having received - or even heard about - stimulus projects were highway contractors. It appears that little of the more than $100 billion of non-highway stimulus construction money has turned into projects under way.One reason for the delay has been the requirement to use only U.S.-made iron, steel and manufactured materials. For certain water and wastewater treatment pipe, fittings and equipment, even the U.S.-based manufacturers incorporate foreign-made components in their products. The Environmental Protection Agency has issued a half-dozen waivers to allow non-U.S. equipment but there are reportedly three times as many requests awaiting waivers.In addition, there has been uncertainty over reporting and other administrative requirements. AGC staff have submitted detailed comments on areas needing clarification and met with agencies to get them to expedite grants, loan guarantees and contracts so the stimulus act will work as intended to save or create much-needed jobs.ARRA includes a variety of bond and tax credit provisions intended to spur more construction. States and localities have begun to issue taxable Build America bonds to fund projects that would have waited longer for traditional tax-exempt financing. But governments differ a lot in how much use they have made of these or other new and expanded financing mechanisms.Contact simonsonk@agc.org if you win a stimulus contract, are involved with any ARRA financing vehicle, or hear about contracts being delayed for any reason. AGC will use the information to make sure all levels of government improve their performance in making stimulus put construction workers and others back on the job.

Construction employment declined in all but 19 communities nationwide this June as compared to June-2008, according to a new analysis of metropolitan-area employment data released by AGC.

Developer-financed construction is shriveling. The latest monthly figures from the Census Bureau on construction spending show big downturns in May from April and from May 2008 in categories that typically rely heavily on bank financing. (The percentages are calculated from numbers that are seasonally adjusted, to account for normal month-to-month variation.)Private office construction spending eked out a gain of 0.1 percent from April but sank 18 percent from a year ago. Lodging sank 2.6 percent and 17 percent. Warehouse construction was off 6 percent and 36 percent. Retail construction was down 6 percent and 31 percent. Multifamily plunged 9.6 percent and 29 percent.These results are consistent with responses sent by Data DIGest readers in the past two months, who universally reported no improvement in credit conditions since the lending spigot was snapped shut last fall.In contrast, the municipal-bond market, which also was moribund in September, has come back to life. The American Recovery and Reinvestment Act included several new, expanded or extended bond provisions that have helped, notably "Build America Bonds."To report your experiences, good or bad, with bank, corporate or government financing, send an email to simonsonk@agc.org.

In light of recent job loss figures, AGC's chief executive officer Steve Sandherr urged the administration and Congress to stimulate new commercial lending and hasten non-transportation stimulus construction projects that have yet to begin.

AGC's chief economist Ken Simonson was quoted in Tuesday's New York Times.  Simonson commented on the effect of the recession and interest rates on the multi-family housing industry.