Have no illusions – the construction industry is experiencing one of the worst crises on record.
Take housing as a case study. Since 2005, every market in the United States has experienced sharp declines in issued building permits. According to data by the U.S. Census Bureau for over 170 metropolitan areas, there was not a market that escaped a decline of at least 13 percent, with over half experiencing drops of 75 percent or more. Many areas, including major regions like Atlanta, have declined by upwards of 90 percent.
Or look at joblessness among construction workers. The latest American figures have unemployment hovering around 13.7 percent, with peaks approaching 20 percent since 2005. October saw another 20,000 jobs lost, with the industry bucking the trend of slow recessional recovery seen in most other sectors. Those fortunate enough to find employment are faced with severe pay and benefit cuts as companies desperately try to stop the hemorrhaging of profits, as evidenced by the recent protests in London.
RELATED STORIES TO INDUSTRY DECLINE
Aggregate manufacturing has suffered alongside the building industry’s collapse. Titan Cement, Greece’s largest producer, saw sales fall almost 20 percent in the last quarter alone. Glass, stone, lumber, and other building material sectors are struggling as fewer and fewer projects are commissioned.
Most industry forecasts have little or no recovery projected for all of 2012 and even into 2013. Even the iconic oases of exceptional growth, such as Abu Dhabi and Hong Kong, are going through contractions as businesses shy away from expansion, focusing instead on cost-cutting initiatives and reverting to slow-growth models. Contractors in Dubai, used to hiring hundreds of workers per week, have seen new hires slow to just a few per month.
What is preventing any substantial recovery in the industry, and why is the crisis only going to deepen? Answers to these questions, as well as some thoughts on which sectors and strategies may reverse the trend, coming up in Part 2.