For this week’s Guest Post Friday here at Musings, we welcome Alex Levin. Alex is a writer for several surety organizations. Although much is unknown about them, surety bonds are a necessary requirement for many small businesses to open and are required on almost all major construction projects.
With an unemployment rates holding steady around 9%, the effects of the recession are still surrounding us. The construction industry, one of the hardest hit, still struggles to recover. But, what many want to know is if the worst is behind us. Has the construction industry hit the bottom, and as we ring in a New Year can we look forward to more job opportunities and projects for contractors?
Some fear we’ve only just begun to dig ourselves out from the rubble and more struggles are imminent. In fact, the Engineering News Record reports the level of unemployment for construction is at a record high of 16% compared to 7% in 2007.
Within the last two years bankruptcies have overwhelmed the industry and there is evidence that there could be many more closures for the New Year. One warning sign? Much of the work currently being completed by contractors are only backlog projects from the construction industry’s busiest years of 2005 to 2007. This means new work isn’t coming in and many are struggling to complete work from years prior. Due to this, several companies are most likely headed for voluntary closure or, in the worst case bankruptcy.
In North Carolina alone, Carolinas AGC reported a 40 percent total monetary loss in contract awards from 2010 to 2011. As companies aren’t bringing in income, many financial construction supporters, such as surety agents, will be expected to finish work that their bonded principals simply cannot complete. Banks providing construction loans, project owners and subcontractors expecting payment are others also subject to face losses in this declining industry.
But, some are optimistic. The Associated General Contractors of Las Vegas reports the average hours worked and hourly wages for construction workers have spiked in recent months. Although major projects may not be awarded, this small increase in prosperity gives hope to one of the areas most affected by the recession. In 2006, 92,000 construction jobs were cut. While the projects contractors are focusing efforts on are unlike the typical megaresorts that once were the main source of employment for Vegas contractors, an increase in small buildings has allowed many to continue working.
Another source demanding workers is in refurbishing and remodeling. In fact, MGM Resorts International reported spending $78 million within the third quarter and expects to spend $275 million for the year. Their projects include remodeling the Bellagio and MGM Grand and unveiling eight new food outlets within their properties.
Some also feel the bottoming out of the industry means opportunity for new businesses and partnerships. Contracting companies that are profitable during times of a weakened economy are in prime position to create smart mergers. Bonding companies and banks can also help prompt an upswing within the industry by financially supporting these new acquisitions. As the debate between the optimists and pessimists wages on, it appears that time will be our indicator of what lies ahead for the future of construction.