For those looking for signs that the economic recovery we’ve been promised for five years might finally be taking hold, and that the Tacoma renaissance we’ve been promised for even longer might be back on track, last week’s entries on The News Tribune’s Biz Buzz blog made for uplifting reading.
Here, for example, is an item on the opening of Point Ruston’s first building, a 173-unit apartment structure. Scrolling down, we find an item on a future groundbreaking for a hotel on the Foss Waterway. And, oh look, an update on the planned McMenamin’s renovation of the Elks building.
That’s hardly a comprehensive list of what’s happening or coming, and three high-profile projects do not a construction economy make, but the fact that those projects are nearing a start or are being completed is no small matter given what we’ve been through.
What we’ve been through is the nastiest downturn in recent memory, one that started in the financing of construction (mainly for residential development) and spread through the rest of the economy.
Even in a severe downturn, construction doesn’t come to a complete halt. Around here, major projects such as the LeMay museum and state Route 16 continued. But to get a sense of just what it is we’re trying to recover from, let’s turn to the 2013 Dodge Construction Outlook, issued by McGraw-Hill.
That forecast calls for a 6 percent increase in total U.S. construction starts (measured in dollar volume) this year, following a 5 percent increase in 2012, a 1 percent increase in 2011 and a 2 percent gain in 2010.
Happy days are here again, right? Um, we’ve got a ways to go for that. Even if construction starts do grow at that 6 percent rate this year, that would still leave 2013’s total at half of the 2005 on an inflation-adjusted basis, according to McGraw-Hill Construction.
Said an economist in a release accompanying the issuance of the report, “The modest gains experienced during the past two years have in effect produced an extended bottom for construction starts, in which the process of recovery is being stretched out.”
But a stretched-out recovery is better than none at all, and if the percentages McGraw-Hill is forecasting prove out, the trend in year-over-year percentage increases is decidedly in the right direction.
That matters for a whole lot of reasons, starting with the evident, tangible ones. Statewide the construction sector in March was 134,000 jobs (not seasonally adjusted), the Employment Security Department says. That’s 3,800 jobs better than the same month a year ago. But back in March 2008 construction employment in Washington was – yikes – just over 200,000.
True, construction jobs and contract totals are subject to fluctuations as big projects start up or are completed. Still, construction employment remains well below what might be considered a normal level commensurate with a growing economy.
Again, though, the trend would appear to be in our favor. Having thousands more people back to work in construction means thousands more households drawing paychecks, reducing debt and making purchases.
Calculating multiplier and ripple effects from a single sector’s economic activity is at best an inexact art, but we know something must be happening somewhere else if something is happening in construction. Someone has to make the wiring, plumbing and other building materials those construction workers are installing; someone plans to buy furniture for those apartments and fixtures and equipment for the business establishments in that development, the hotel and the restaurant. Someone else has to get those materials and that equipment to the job site.
In the last month, we’ve heard the chief executives of forest-products manufacturer Weyerhaeuser and truck maker Paccar cite the housing sector as an area of strength for their respective businesses. Weyerhaeuser reported its lumber mills operating at 90 percent of capacity in the first quarter; Paccar’s Kenworth subsidiary will begin production, at its Renton plant later this year of a new model of truck designed for multiple applications in construction.
A construction revival is also good news for owners and developers of those projects. Money tied up in land and projects delayed, suspended or terminated is worse than non-earning dead money, it’s costing them. Getting those projects completed and earning a return is beneficial to their own economic fortunes, not to mention those of any lenders that might be involved.
There are intangible returns as well. As more projects get started and completed, more potential developers and investors become more confident that it’s safe to get back in the water.
That’s particularly important for Tacoma, where confidence and momentum are rare and easily distressed creatures.
Construction was one of the first sectors into the recession, and will be one of the last out. Its recovery is crucial to the overall economy’s health. Construction’s rebound is by no means robust and its sustainability is by no means assured. Given the alternative – what we’ve seen the last five years – we’ll take it.