Civil engineering, which includes roadways, bridges and tunnels, appears to be the most resistant to current trends. County engineers in many states report not only stability in their current bid processes, but many states are taking advantage of federal grants and loans that have been incorporated to offset tightening budgets to fulfill current construction contracts that can't be delayed.
So what is on the decline? New home construction is by far the most declining area of construction efforts. With problems with the mortgage industry, rising supply costs and the massive lay-offs, those who as little as a year ago were planning to build have now opted to remain where they are until the outlook improves. In fact, the US HUD (Housing and Urban Development) released its November 2008 numbers and has revealed a 15.6% decrease in new home building permits. Even more shocking is the 48.1% decrease from last year. Another way to look at this: there were 1187 new home permits issued in November 2007 while November 2008 shows only 616 new home permits (these numbers are from those states that report these figures). Single family residences show a 12% decrease from October 2008 and housing completions were down from this time last year as well. Clearly, these numbers are indicative of more and more Americans choosing to hold on to their savings. With the high cost of supplies and fuel, even though oil prices have dropped, it simply isn't feasible for families to build new homes. Further, there were 121 permit requests made, but not used during November, indicating last minute changes for many.
Since all construction projects are dependent on issues such as interest rates and tax laws, factors play into these areas that are applicable in no other field. These influences can be tremendous indicators for other aspects of the American economy, and even sometimes, the global economies. The American economy, as we all know, affects other countries' current economic situations, including Japan, China and some European countries.
With much attention now being paid to environmental issues, many advances are on the horizon that will affect the global construction efforts. New guidelines and requirements are expected to be passed that address environmental concerns. A blessing and a curse, according to some construction analysts, these new laws will be big players. As companies scramble to remodel their current properties to ensure compliance with the sure-to-come new federal guidelines, there will most certainly be an opportunity to offset some of the less than ideal predictions for the construction sector. In fact, it's predicted that within the next thirty-six months, nearly 80% of American companies will be engaged, on some level, in "green activities". These activities, of course, are directly correlated with these remodeling efforts.
Many who have made their lives within the construction industry are facing the realization of unemployment insurance for the first time in their working lives. Their faith in the construction sector is strong and many insist it's only temporary and expect to be back to work before their unemployment insurance expires. Of course, with 2008 being the history-making election year that it was, many are waiting for the swearing in of the next US President and have high hopes for what he and his administration will accomplish, especially during the traditional "first 100 days" that we all look forward to. Indeed, President-elect Obama doesn't appear to be waiting for the official swearing in. He's moved quickly in announcing new policy and has managed to cover more than half of his appointments before the new year even rang in.
It's anyone's guess as to how long this might last, but most analysts agree that it is temporary and in fact, we have already seen promising signs. Some of these signs include the encouraging data from windmill construction (which is expected to allow for many new projects), the renewed surge in railroad transportation, a consistent drop in oil prices and of course, the promises of an incoming president.
Clearly, the construction sector has been found to be one of the most vulnerable areas affected by the economic cycle. Most small company owners depend on credit extensions to finance new projects. The tightening credit requirements in the housing industry were only the tip of the iceberg. Other creditors, from national banks to small town supply companies, have followed suit by either rescinding credit charge accounts or decreasing available credit lines.
As the construction sector is buckling down for a bumpy, albeit short-lived ride, those who are involved in peripheral positions, such as electricians, suppliers and even local economies that depend on out of town construction workers to fill hotels and restaurants, have no choice but to batten down as well.
