AGC REVIEW & FORECAST
one out of every six construction jobs-- 150,000, seasonally adjusted. (Seasonal adjustment is a statistical method to account for month-to-month variation due to regularly recurring factors such as holidays and normal weather patterns.)
Employment Fluctuates Like many other states,
construction employment rebounded strongly in May and June as project owners and government officials ended the shutdowns they had ordered and as construction firms made use of Paycheck Protection Program loans to bring back furloughed employees. However, employment fluctuated from June through October. As of October, 80% of the employment loss had been made up, but the level that month, 869,300, was still 20,600 less than in October 2019 and 27,600 or 3% less than in the pre-pandemic peak month of February 2020. Of greater concern, by October
total nonfarm employment had recovered fewer than half of the 2.6 million jobs lost in the state. Tat lagged the nationwide job recovery and signaled that California is likely to be slower than other states in regaining its economic footing. A number of factors that had
previously bolstered the California economy now work against it. Tousands of employees in the state’s strong technology sector now work from out of state. Foreign visitors and immigrants are either barred from coming or no longer find it attractive to do so. Vacationers and business travelers from other states are coming in far smaller numbers. Even when the pandemic subsides
or is controlled, it is not clear how soon – if ever – people will return. Demand for new offices, restaurants and stores, hotels, airport facilities, and many other types of structures is likely to remain depressed.
www.AGC-CA.org
Slower population growth means slower growth in demand for housing and related infrastructure, retail and consumer services, schools and other local public buildings, and slower growth in state and local tax revenues to finance construction.
Difficulty Doing Business Te outlook for construction in
the Golden State has looked less than golden for quite a while. Years of ever more massive wildfires and areas with intolerable air quality or prolonged, unplanned power shutdowns make living and doing business in the state increasingly difficult. In the five years before the
pandemic, California’s population growth had slowed from 336,000, or 0.9%, in 2014, which was slightly faster than the national growth rate of 0.7%, to just 50,000, or 0.1%, well below the 0.5% national rate. Te 2020 data, expected in early 2021, may show a population loss for the first time in the state’s history. Slower population growth means
slower growth in demand for housing and related infrastructure, retail and consumer services, schools and other local public buildings, and slower growth in state and local tax revenues to finance construction.
On the Brighter Side Tere are several construction
segments that look positive, however. Employment in highway, street, and bridge construction exceeded 2019 levels by 4% as of October. Even though fuel tax and toll receipts were
down sharply in the spring of 2020, they recovered more quickly than other revenue sources. Both residential and nonresidential
building contractors also posted small year-over-year employment gains by October, though for different reasons. Residential contractors benefited from demand for new homes as mortgage interest rates repeatedly hit record lows and existing homeowners sought to remodel and add to their properties to accommodate work- and school-from- home needs. No letup is in sight. Remodeling is likely to be a strong
market niche for all types of nonresi- dential buildings as new owners replace closed businesses and many spaces must be retooled to meet new safety and health protocols. Demand for distri- bution facilities will expand beyond the Inland Empire and Central Valley as customers expect ever quicker deliveries, necessitating smaller fulfillment centers close to residential areas. Te power sector will continue to
invest in generation, transmission, and distribution structures to lessen the risk of sparking more wildfires, to replace damaged facilities, and to meet more stringent renewable requirements. Data centers and buildout of 5G networks will also remain robust, if small, categories. Health care is another segment that
is likely to generate demand, but the type is less clear. Hospitals and nursing homes have endured major losses of revenue and confidence. Yet the need for both acute and long-term care is likely to become even larger as the population ages and more individuals survive covid-19 but with lingering symptoms. Tus, California contractors will
face multiple challenges in 2021. But there will also be selective opportunities.
Associated General Contractors of California 17
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