Construction sector hit hard in labor downturn

The unemployment rate in the construction industry has hovered around 20 percent for the year and a recent newsletter from Associated Builders and Contractors carried even more glum news.

“Employment in nonresidential building construction continues to slump, a reflection of the fact that momentum in the broader economy has yet to meaningfully impact many segments of America’s nonresidential building construction industry,” said Anirban Basu, chief economist for ABC.

Workers erect exterior walls at the City Market grocery story under construction just east of 24 Road in Grand Junction. Unemployment in the construction sector remains at an estimated 18 percent, almost the double the overall jobless rate for Mesa County in June. (Business Times photo by Mike Moran)

The newsletter reported that the nonresidential construction industry shed 4,300 jobs in June, bringing total job losses in the 12-month period that ended June 30 to 45,000.

The same newsletter carried the headline, “Construction Unemployment Stuck at 20.1 percent in June.”

In the Grand Valley, the Mesa County Workforce Center gets the unemployment rate among construction workers at about 18 percent, compared to an overall jobless rate of 9.7 percent in June, the latest month for which estimates are available.

EC Electric is among the many local contractors that have been forced to lay off workers. Company president Rod Johnson said he employed 125 people in 2008, but the number dwindled to 45 by mid-July of this year. Johnson also instituted wage cuts for himself and employees last year.

“About a year ago, work hit the wall and dropped like a rock,” Johnson said. “Work is difficult to get.”

When bidding on the few projects that are planned, competition is fierce, he added. “Our margins are tight, if they exist at all.”

But at least one large Grand Junction firm is holding the line on employment.“We haven’t had to lay anybody off,” said Ed Forsman, chief executive officer of FCI Constructors. “But we are seeing some smaller projects than what we’re used to.”

Johnson said the situation could be worse at his company if not for planning for such a downturn. “We’re fortunate,” he said. “We’re a strong company and we have reserves.”

Despite the downturn, Johnson said he tries to look at the long-term picture and continues to invest in equipment and training for employees. He said such expenses require him to submit higher bids than some competitors, so he asks potential clients to also look at the bigger picture.

“Be wary of low bidders,” Johnson said. “Consider the scope or completeness of the project.”

If conditions warrant, Johnson said he could lower bids, but would have to cut into worker benefits to do so. “We haven’t pulled out all the stops yet,” he said. “But that takes its toll on profits.”

Johnson said the current downturn is different from the oil shale bust of the 1980s.

At that time, people who lost jobs could travel to other parts of the country to find work.

“Now, you can’t go anywhere else,” he said, noting that the downturn has hit much of the nation and is even global in scope.