Preston Todd has owned Red Truck Construction on Bainbridge Island, Washington for the past five years. In the past six months he's seen colleagues go out of business, he's laid off employees, and he's seen a rise in the number of unlicensed contractors undercutting his bids.
With the construction industry's February unemployment rate surging to 21.4% (the national rate was 8.1%), according to the latest Bureau of Labor Statistics report, Todd is not alone. Construction is taking the brunt of the economic blow.
According to the Washington State Employment Security Department, the number of workers employed in the construction industry dropped 10% between January 2008 and January 2009. A department representative says, statewide, the number of people collecting unemployment benefits is 105% higher than it was a year ago—its so high, in fact, that the department recorded all-time highs for unemployment applications in both December and January.
It makes sense then, that the American Recovery and Reinvestment Act (ARRA) assigns $134.6 billion to new infrastructure. Highway and bridge construction, energy-efficiency retrogrades, public transportation improvements, and electric grid modernization are among the construction projects that rely more on manpower and less on machinery.
"There's no doubt the stimulus plan will have a positive impact for construction businesses and their workers across the country," says Stephen Sandherr, chief executive officer of the Associated General Contractors of America, "When you get beyond the politics and the policy, the fact remains. These investments will put people to work, save businesses, and help rebuild aging infrastructure."
On Monday, Washington State Governor Christine Gregoire and the Washington State Department of Transportation (WSDOT) announced that the first string of projects using ARRA funds in Washington would concentrate on highway maintenance and improvements on I-90 and US 101 and SR 103 in Pacific County. "These projects support nearly 90 construction-related jobs and, indirectly, numerous private businesses, industries, suppliers, and neighboring communities in central and southwest Washington," says Washington Transportation Secretary Paula Hammond.
But Todd and other small construction company owners like him are more guarded about seeing the effects of the ARRA right away. "I don't think it's going to help," says Todd "but we'll survive." He says that the big projects the government has proposed will not affect the majority of contractors—just the big ones.
WSDOT representative Amy Danberg says the effects of the stimulus plan and the plan's reach to small construction companies like Todd's are based on a difficult to quantify ripple effect that will have specific direct and indirect outcomes.
"Within the direct effect," says Danberg, "are the contractors, the businesses—the workers that are here in the state. They're going to turn around and take that money and go to the grocery store and buy their groceries or they're going to go to dinner at the small business or the locally owned mom-and-pop restaurant. The money supports jobs and then those people turn around and invest that money into their community."
This is to say that the initial construction-fueling economic jolt will hit most small businesses around the same time the rest of us start feeling its effects. And no one seems to know when that might be.
As for Todd and Red Truck Construction, spring brings more good news than any government report. He is looking to rehire a couple of employees for the summer and he says the phones have started ringing again. With any luck, the effects of the stimulus plan will kick in just around the time seasonal construction slows as winter rounds the bend.