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Recovery Still Far Away for Construction Industry as Demand for Private and Public Construction Likely to Remain Weak for Much of 2011 Even as the Stimulus Winds Down

The construction unemployment rate jumped to 22.5 percent in January 2011 as the sector lost another 32,000 jobs since December 2010, according to an analysis of new federal employment data released today by the Associated General Contractors of America. The new data underscores the challenges facing the industry as the stimulus winds down and demand for private and public construction remain weak, association officials noted.

“It may be a new year, but the construction industry is still suffering from the same economic conditions that kept its unemployment rate so high last year,” said Ken Simonson, the association’s chief economist. “With stimulus work starting to dry up, Congress proposing major funding cuts and private demand still weak, it is hard to see how the industry will add jobs this year.”

While harsh winter weather likely contributed to some of the industry layoffs in January, the industry has lost 130,000 jobs over the past 12 months even as total private sector employment has increased by nearly 1.3 million, Simonson noted. He added that the fact the construction industry’s unemployment rate continued to be more than twice the overall rate had much more to do with economic conditions than the weather.

The construction economist noted that the industry’s job losses came from the nonresidential construction sector, which lost 35,300 jobs between December and January, while the residential sector added 3,500 jobs. Nonresidential specialty trade contractors were hardest hit, losing 21,000 jobs. Meanwhile, winter weather and stimulus wind-downs likely helped drive down heavy and civil engineering construction employment by 7,000 jobs, Simonson suggested.

Association officials said that construction employment is likely to stagnate through much of 2011 as stimulus funds dry up and public and private sector demand for construction remains weak. They added that proposals in Congress to cut investments in infrastructure, including a proposed 17 percent cut to transportation funding for this year, would only make the construction employment situation worse.

“It is hard to understand how putting more people out of work and allowing aging infrastructure to deteriorate further is going to boost economic activity or cut the deficit,” said Stephen E. Sandherr, the association’s chief executive officer. “Less tax revenue, higher unemployment costs and growing repair bills for roads, bridges, water systems and airports will only grow the deficit and add to our national debt.”