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Stimulus Gains Largely Offset By Depressed Private, State and Local Construction Demand

Construction employment declined in May as 35,000 workers lost jobs, offsetting most of the increases the industry experienced in March and April, according to a new analysis of federal employment figures by the Associated General Contractors of America. The figures show how fragile the sector is despite recent increases in stimulus funding activity, association officials noted.

“Growing stimulus activity was clearly offset by weak private sector demand and diminished state and local construction budgets last month,” said Ken Simonson, the association’s chief economist. “Unfortunately, construction employment is likely to remain both relatively low and unstable until at least early 2011.”

Construction employment declined from 5,626,000 to 5,591,000 between April and May 2010, Simonson noted. Meanwhile the construction unemployment rate, which is not seasonally adjusted, actually declined from 21.7 percent to 20.1 percent during the same time period. With over 1.7 million construction workers unemployed, however, Simonson noted that the industry’s unemployment rate was still more than double the national rate and was the highest May rate since the series began in 1976.

Nonresidential construction employment was particularly hard hit in May, accounting for 28,100, or more than four out of five, of the jobs lost in construction last month. Citing construction spending figures released earlier this week, association officials noted that developer–financed construction investments, including office, retail and multi–family residential, are down significantly this year.

Given high vacancy rates, private sector construction demand is likely to remain weak for many more months, association officials noted, adding that state and local construction demand would remain soft for even longer considering the budget shortfalls for most state and municipal governments. They urged Congress and the Administration to take advantage of low construction costs by acting on long–stalled infrastructure bills, such as the six–year surface transportation legislation.

“With the temporary stimulus already starting to run its course, it is time for federal officials to act on the longer term infrastructure programs that will give construction workers a change to make it through the protracted construction downturn,” said Stephen Sandherr, the association’s chief executive officer. “With construction prices low, now is the perfect time for Washington to modernize the nation’s aging transportation, water, and building infrastructure.”

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