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By GARY FIELDS
Wall Street Journal WASHINGTON Highway-construction companies around the country, having
completed the mostly small projects paid for by the federal
economic-stimulus package, are starting to see their business run
aground, an ominous sign for the nation's weak employment picture.
Tim Word, vice president of Dean Word Co., a heavy-construction company
in New Braunfels, Texas, said his income is now coming mostly from
projects that are winding up. He said that in normal times he has about
$100 million of signed contracts in hand. But that number has fallen to
$30 million, and the pipeline is empty. In the past two years, his work
force has shrunk nearly 40% to 260 from 420. "Having something to bid on is the lifeblood of the industry, and it's
running out," said Mr. Word. He isn't sure what will happen next year
without new projects. "There's no pavement fairy that's going to help."
[JOBS] Since the recession began in 2007, employment in the construction
industry has fallen by 1.6 million, the Labor Department says. Though
the housing sector accounts for many of those job losses, road builders
have also suffered, and executives in the industry expect layoffs to
rise next year. More broadly, the Congressional Budget Office late Monday said it
estimates that the federal stimulus package sustained between 600,000
and 1.6 million jobs in the third quarter, and raised gross domestic
product by 1.2 to 3.2 percentage points higher than it would have been
without the program. The construction industry's unemployment rate, including related
extraction businesses, such as gravel processing, climbed to 19.1% in
October, up from 10.7% a year earlier. The transportation and
material-moving sectors saw unemployment rise to 11.6% from 7.9% over
the same period. State officials and local contractors trace the industry's woes to the
recession and the collapse of the residential and commercial real-estate
markets. In addition, they cite the federal government's delayed plans
to enact a transportation bill. In one version, the law would have
provided $450 billion for highways and infrastructure projects over the
next six years. Congress is no longer actively considering the bill, which has been
bumped aside by competing priorities such as the Obama administration's
health-care overhaul and by growing support for reducing the federal
budget deficit. Some lawmakers fear that continued stimulus spending
could harm the economy down the road by saddling the nation with higher
debt-servicing bills. But high unemployment could revive the transportation-spending bill's
prospects. Earlier this year the Obama administration was opposed to
pushing a big highway bill, deterred in part by the prospect of raising
gasoline taxes to pay for it. Faced with a 10.2% jobless rate, however,
officials here are rethinking their stance. Thursday, the White House
will hold a "jobs summit" to discuss ideas, which are likely to include
shifting some spending to transportation projects. Without an infusion of federal funding, state transportation departments
say they can't develop long-term roadway projects, which are critical to
the industry. About half of states' funding for such projects comes from
the federal highway trust fund, which is funded by the gasoline tax. Christian Zimmermann, chief executive of Pike Industries Inc., a
1,200-employee company in Belmont, N.H., that paves roads and operates
gravel pits and asphalt plants, recalls waiting out 2003 and 2004 while
Congress deliberated on the last highway bill. "It was miserable," he said. The industry's saving grace then was a booming private sector. This time
around, the private sector isn't picking up the slack. "Two years ago,
our phones would have been ringing off the hook with the good weather,"
Mr. Zimmermann said. "This year the phones ain't ringing." Without long-term government projects, Mr. Zimmermann said he may have
to lay off as many as 150 people next year. "The stimulus was a shot in
the arm, but that's all it was," he said. Industry executives say that the $27 billion out of the $787 billion
stimulus package that went to highway construction went mostly to
relatively small "shovel ready" projects, those that didn't require much
lead time. The $27 billion 77% of which had been committed as of Nov.
13, according to the Associated General Contractors of America has saved
some jobs. "But if I'm a big company, I need major freeway rehabilitation work and
bigger projects," said Steve Simmons, deputy executive director of the
Texas Department of Transportation. Texas's wish list is taking "a back
seat because we have no funding for it," Mr. Simmons said. In the near term, House Democratic leaders are considering paying for
some transportation projects that weren't funded by the stimulus
package. The size of the spending package hasn't been decided, nor has
the question of how it would be funded. Congress is also weighing a
broader set of initiatives to spark job growth. Jim Berard, spokesman for Rep. James Oberstar (D., Minn.), chairman of
the House Transportation and Infrastructure Committee, said the White
House is "warming" to the idea of considering a bigger highway bill
sooner than it had initially planned. A recent survey by the Associated General Contractors of America found
that more than 76% of contractors expect state transportation
departments to put less work up for bid in 2010 than this year. And 44%
said they are likely to lay off employees next year. John McCaskie, chief engineer at Swank Associated Cos., said his New
Kensington, Pa., bridge-and-highway rehabilitation company faces more
competition for the few projects out there. He said contracts worth less
than $2 million are attracting a dozen competitors these days, compared
with around four previously. "You end up bankrupting your company to be
the low bidder." If contractors cut back, their equipment suppliers will be hurt as well,
said Ken Taylor, president of Ohio CAT, Broadview Heights, Ohio, which
sells equipment made by Caterpillar Inc. Contractors have usually placed
orders for the spring construction season by now, he said. That hasn't
happened, and he may need to eliminate $50 million of his $175 million
inventory. Mr. Taylor has pared his staff to about 750, down from 1,000 in June
2008. "I feel like I'm at a spot where we've done a lot of things, and
we should be able to manage through. But if it gets worse I may be
looking at closing a couple locations."
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