Barometer Shows Lack of Recovery in Building

by Brian Falk, Charlotte Business Journal

The Carolinas AGC Construction Barometer registered a drop of 2.3% for the fourth quarter, a decline that's mainly the result of increased unemployment in North Carolina.

The barometer combines quantitative economic conditions with attitudes and opinions of construction experts in the two states.

"The change in the unemployment rate is seasonal more than anything else," says Tony Plath, associate professor of finance at UNC Charlotte and compiler of the barometer. Since this reading was taken in the fourth quarter, the drop in construction employment is not surprising, given the difficult winter weather seen across much of the Carolinas.

"Things are stronger economically than what the index would suggest," Plath says, "because other indicators in the economy are picking up, but construction is still pretty quiet."

Building activity is likely to remain quiet for some time because the industry lags the rest of the economy. That helped the industry when the recession hit, but it also means construction will be slower to recover.

Plath sees bright spots in the overall national economy. The quick resolution to the war in Iraq provided a big boost to consumer confidence, while interest rates and inflation remain low.

Many contractors are encouraged that construction projects are still moving forward for the 16-school University of North Carolina system. Many primary school systems in high-growth areas in the Carolinas also have busy construction schedules.

Monteith Construction Corp. of Monroe does a lot of work building schools, and President John Monteith says the flow of construction projects has been steady. "The pace has been sustained," Monteith says, "and I think things look good on the horizon."

Bill Norwood is not as confident about the supply of future public works. The president of Monroe-based State Utility Contractors is worried about public funding drying up. "I think we've been seeing signs of that for the last year," Norwood says. "That's one of the biggest problems we have right now."

Michael Dane, president of Dane Construction Inc., a Mooresville-based bridge contractor, reports a slower flow of projects coming from the N.C. Department of Transportation, but he's been told that's because of permitting problems.

"We don't really see funding as an issue," Dane says. "Once all the paperwork's been cleared up, we anticipate seeing some more work coming out over the summer."

Many contractors who specialize in public projects hope the economy will improve, if for no other reason than to ease competition. Many traditionally private-sector contractors have had to seek public work to stay busy, in turn making profit margins razor thin.

Plath expects them to get their wish, but not soon. "When you're treading water, I know it's hard to hear that the life raft will be coming later this year. But that's the state we're in."

The biggest concern in the economy is the unemployment rate, Plath says. Although joblessness increased recently, he expects the end of the war and rising corporate profits to create opportunities.

With summer coming, the industry may catch a break just from improved weather. Contractors enduring the winter's snow and ice were undoubtedly looking forward to this spring, but it's been the wettest in several years.

Like an optimistic weatherman, Dane sees better economic conditions coming this way. "We are forecasting that conditions will improve throughout the rest of the year," he says.

Norwood doesn't anticipate much change in the next six months.

Monteith sees blue skies, but they're farther away. "I think the rest of 2003 will be consistent with the last year," he predicts. "I think a year from now things will be headed back up. I am cautiously optimistic that things are already headed in that direction."