Michigan's Commercial Construction Outlook Bleak

by Aram Kalousdian | September 28, 2010

Ken Simonson, chief economist for the Associated General Contractors (AGC) of America, recently addressed the summer conference of the AGC of Michigan and the American Institute of Architects (AIA) Michigan.

“The construction outlook for Michigan remains dismal; what has changed is that the rest of the country is now 'catching down’ with the state,” said Simonson. “In fact, several once-hot states are now shedding construction jobs even faster than Michigan.”

Michigan’s construction employment totals dropped nearly 9 percent from May 2007 to May 2008, the fourth largest decrease in construction employment in the U.S. In 2007, construction in Michigan accounted for approximately 3.4 percent ($13 billion) of the state’s gross domestic product (GDP) of $382 billion. However, national construction contributes nearly 5 percent to the U.S. GDP.

Simonson tracks major construction material costs on a weekly basis and notes the fuel price increases that have devastated Michigan’s auto industry are significantly inflating the cost of construction. “Contractors use huge amounts of diesel fuel, which has risen even more than gasoline in price, for off-road equipment and construction trucks. They also pay fuel surcharges on the thousands of deliveries to a job site,” Simonson said. “High petroleum costs directly affect the cost of asphalt and some construction plastics, and indirectly push up the price of many other materials.”

“Michigan’s best hope for its construction industry lies with new growth industries like alternative energy, and with markets like power generation, hospitals and higher education,” said Simonson. “In addition, the state’s position as a gateway to Canada and a link between the Atlantic and the Midwest should spur some trade-related construction.”

The AGC of Michigan is a full service construction trade association providing safety, education and training, legislative and regulatory advocacy, human resources, labor relations options, construction information, and affinity programs. AGC members are dedicated to skill, integrity and responsibility. For more information, visit www.agcmichigan.org.

TAUC Sponsors Industry Survey

The largest expansion in the industrial construction market in decades recently prompted the union construction industry to conduct a study to determine the impact of increased job demand and costs related to forecasted labor shortages.

The 2008 Construction Industry Conditions Survey, sponsored by The Association of Union Constructors (TAUC) and the North American Contractors Association (NACA), gathered information from more than 200 industrial contractors regarding the escalating workload and its financial impact.

“The expansion of the industrial construction market is fostering a situation of additional work practices which increase labor costs beyond the contractual wage and fringe rates. As a result, traditional measures of labor costs and labor cost escalation are excluding a sometimes significant component of current labor costs,” said Robert Gasperow of the Construction Labor Research Council (CLRC).

The survey findings were released at the 2008 TAUC Leadership Conference in May. The most notable finding from the survey was that two-thirds of craft workers have experienced labor shortages in some form or another. According to the survey results:

  • Almost two-thirds of contractors have experienced labor shortages with single or multiple crafts;
  • The crafts most likely to be experiencing shortages are boilermakers, pipefitters and ironworkers;
  • Nearly half of the contractors utilize an extended work schedule;
  • Almost half of the contractors have a work schedule of more than 40 hours per week;
  • Two-thirds reported working their crews five days per week;
  • A variety of supplemental payments are being made which is outlined in the report;
  • One-third of workers are being given travel payments

“This survey was conducted in large part to determine the specifics of the labor shortages – not whether or not they were occurring – especially which crafts are being affected in which parts of the country,” said TAUC CEO Steve Lindauer.

TAUC is an association of 2,500 union contractors from across the United States, primarily engaged in steel erection, industrial maintenance and construction. The mission of TAUC is to act as an advocate in advancing and enhancing the value of the union construction industry through an educated and action-driven membership that fosters the promotion of labor-management cooperation, workplace safety and health, and collaboration with construction users in order to help union contractors compete more effectively in the marketplace.