Post-COVID construction projections not clear

An Austin & Bednash Construction backhoe is part of a project on Summit Bridge Road in Middletown on Wednesday morning. (Delaware State News/Craig Anderson)

DOVER — The outlook for construction projects is murky, at least one expert believes, and overall industry contraction may be looming.

That’s according to Associated General Contractors of America chief economist Kenneth D. Simonson, who maintains that Delaware’s recently increasing job numbers may have peaked within the past month or so, which is the trend nationally, as well.

“Many states have tightened restrictions since mid-June, and school districts that had planned on reopening by September are now turning to all-remote instruction,” he said. “These factors are likely to depress economic recovery and cause owners to postpone or cancel construction.

While construction employment nationally fell by nearly 1.1 million or 14% in March and April, “the industry added 611,000 employees in May and June, thanks in part to rapid receipt and utilization of Paycheck Protection Program loans, as well as the removal of restrictions on construction imposed in some states (such as Pennsylvania) in March and April,” Mr. Simonson said.

Currently, there’s still about 444,000 (6.2%) fewer jobs nationally than in February, Mr. Simonson said.

According to Mr. Simonson, Delaware followed a similar pattern:
• Seasonally adjusted employment reached a recent peak of 23,200 in January and February. (Seasonal adjustment removes the influence of normal monthly fluctuations due to recurring weather and holiday patterns.)
• Employment dropped by 3,000 (13%) in March and April to 20,200, the smallest total since 2014.
• Employment then increased by 800 (4%) in May and June. The June total, 21,000, was 2,200 (9%) less than in February and 1,900 (8%) less than in June 2019.

Moving ahead in 2020
Taking solace in the General Assembly’s recently approved $708 million capital budget, Delaware Contractors Association Executive Vice President Bryon Short maintained that “it’s still a pretty strong public works program going into the next year.”

The private sector’s activity, however, isn’t so clear-cut.

“It’s going to be slower, but nobody knows what the true picture will look like until time progresses,” he said. “With some of the institutions hardest hit — hospitals, universities — there’s definitely uncertainty on just how much impact it will have on their capital plans.”

The DCA has more than 250 members, closely split between contractors and those who support the industry, including certified public accountants, human resource professionals and insurance agents, among others.

Mr. Simonson offered an outlook for the construction industry for the rest of 2020:
Private nonresidential:
• Mostly remodels, COVID-19 pandemic-related or emergency repair work.
• State transportation departments likely to continue projects but with some delays and cutbacks.
• Other infrastructure will depend on amount of advance or assured funding.
• Many state/local building projects will be canceled or postponed.
• Strong single-family improvements; declining multifamily starts.
• Without new work, contractor layoffs and firm closures will increase sharply.
• PPP loans offer only short-term relief; little additional hiring or rehiring likely.

The eventual fallout
The current trends may lead to the following repercussions, according to Mr. Simonson:
• Slower rebound than for other sectors as owners and consumers await certainty and repair of balance sheets.
• Best private prospects: remodeling, local distribution centers, data centers.
• Best public prospects: depends on federal funding.
• Additional highway funding likely; other infrastructure remains uncertain.
• Less state and local building construction, especially in higher education.
• Less demand than pre-crisis for retail, offices, higher education and cultural facilities.
• Possibly less demand for sports, entertainment, lodging and travel-related construction.
• Little long-term change in outlook for K-12 education, water/sewer and federal.
• No sign of change yet in urban/rural or state-to-state trends

Helpful Coronavirus links

Delaware Division of Health Coronavirus Page
CDC: About the Coronavirus Disease 2019
CDC: What to do if You Are Sick
Johns Hopkins Coronavirus Resource Center
AP News Coronavirus Coverage
Reopening Delaware: Resources for Businesses
Delaware Phase 2 guidance

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