Construction industry recovery called ‘fragile’

Recovery in the construction industry is "fragmentary and fragile," and the bad news for Las Vegas hasn't ended yet, said Ken Simonson, chief economist for Washington, D.C.-based Associated General Contractors.

Nevada has lost nearly 100,000 construction jobs since June 2006, when construction employment peaked at 146,400, Simonson said Friday at Caesars Palace, where he spoke at the Construction Financial Management Conference.

The state's construction employment was down to 48,200 in September, he said.

"That's a huge loss. It took 15 years to grow to that level. Will it take 15 years to get back? My crystal ball clouds before 15 years," Simonson said. "We're all the way back to 1993 levels of employment."

Nevada is still losing construction employment from a year ago, but the numbers did pick up between August and September, the economist said.

"So I think you're near the bottom. The number of foreclosures has been dropping and overall employment has been rising. That's important to get people in a position to buy homes and fill up stores," he said.

Another piece of good news is higher sales tax receipts in August, which fits in with national trends, Simonson said.

Government projects account for about one-third of construction spending, so there could be problems with federal funding from Congress, he warned. That would affect Nellis Air Force Base and other defense-related industries in Southern Nevada.

Simonson said the construction recovery is "fragmentary" because some prices are rising, but not across the board. It's "fragile" because it could easily be derailed, he said.

"If the White House can't reach an agreement on the current tax rate, some segments of the economy could get hurt. You also have to be sensitive to what's going on in China and Europe. Certainly the hospitality and casino businesses here are very sensitive to the ability of Asians to come and gamble here," Simonson said.

The AGC economist said it's "imperative" for Las Vegas to broaden its economic base, even if people return to gambling at levels prior to the recession. More states are approving casinos and people have more options for gambling destinations, from Macau to Maryland, Simonson said.

He said fewer than half the states have been adding construction jobs year over year, and Nevada is near the bottom for steepest construction losses.

Among states losing construction jobs during the past year, Alaska lost the highest percentage (-16.1 percent, -2,400 jobs), followed by New Jersey (-10.2 percent, -13,400 jobs) and Nevada (-9.4 percent, -5,000 jobs). New Jersey lost the most jobs, followed by New York (-12,500, -4.1 percent), Pennsylvania (-9,100 jobs, -4.1 percent), North Carolina (-8,400 jobs, -4.7 percent) and Illinois (-8,400 jobs, -4.4 percent).

Victor Fuchs, president of Helix Electric in Las Vegas, said he lost quite a few workers from two years ago, though he's been able to retain about 500 employees for the last year.

"It's been stable, but we ended up going out of town to do work in Arizona and Utah and neighboring states. That gives us a little more flexibility," he said. "I don't think it got any worse, but it's stable."

Much of the construction work in Las Vegas is remodeling and public works. Penta is doing a $40 million upgrade at Bellagio, and Las Vegas Paving recently completed a $252 million makeover of Interstate 15 from Tropicana Avenue to Silverado Ranch Boulevard.

Some projects, such as the Shops at Summerlin mall, are scheduled to resume construction next year. Projects up for bid include the Callville Bay wastewater treatment facility, and the 45,000-square-foot aerospace ground equipment facility at Nellis Air Force Base.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.