Building jobs, income and tax revenue are forecast to decline despite a rise in permits
POSTED: 1:30 a.m. HST, Sep 24, 2010
Hawaii's struggling construction industry won't begin to rebound until next year, trailing other sectors of the economy that have already begun to shake off the ill effects of the recession, according to a report by a team of economists from the University of Hawaii.
However, the outlook for construction isn't as dire as it was earlier in the year, thanks to recent evidence of stabilization in the housing market, the University of Hawaii Economic Research Organization reported today.
Building permits, a precursor of future building activity, are projected by UHERO to increase in 2010, and housing prices are also rebounding. Honolulu's median home price, which declined by 7.4 percent to $573,400 last year, is forecast to rebound to $598,500 this year and then climb steadily to $694,000 in 2013.
Still, other indicators of the industry's health -- including jobs, construction income and taxes generated from construction activity -- are all forecast to decline this year.
"Hawaii's construction industry continues to seek a bottom to what has been a bruising downturn," according to the report.
Although construction isn't the biggest industry in Hawaii, its impact on the economy is significant because of its volatility and the effect that has on the work force.
"It tends to have really big swings in hiring, and that affects the broader economy," said Carl Bonham, one of the authors of the UHERO report. "It went from employing 40,000 workers a month in 2007 to just 28,500 today. There aren't too many industries where you can lose 30 percent of your work force in just three years."
The decline in workers would have been even larger if not for a flurry of state and federal construction projects moved forward in an attempt to stimulate the economy as the number private-sector projects shrank, according to the UHERO report.
Government contracts surged 20 percent in the first half of 2010 compared with the same period a year ago.
"We expect the pace of growth to back off next year, but government infrastructure projects will maintain a level roughly 50 percent higher than during the 2005-2009 period," the report said.
Some in the construction industry say that while there are jobs available, many are often lower paying or temporary.
"It's tough, but fortunately for us we have unemployment," said Mike Riel, 52, a journeyman tile setter from Ewa Beach.
Riel, who has been out of work for almost two years, said he's turned down job offers that are outside his area of expertise and at a lower salary.
"If you get locked in at a lower scale, it's hard to get back to where you were," said Riel, who attended the Job Quest job fair this week at the Blaisdell Center.
He also said he's been reluctant to take jobs that are just for a short period because he would have to give up his position on the hiring list at the union hall.
"Right now I'm No. 5, and if I go work someplace for a month and then get laid off, I'll have to start off at the bottom again."
In the private sector much of the construction activity in recent years has been concentrated in large projects, such as the Disney resort at Ko Olina and the Allure Waikiki condominium project, Bonham said.
The broadest measure of construction activity, what industry participants pay in excise tax, is forecast to shrink by 15.9 percent this year, the third consecutive annual contraction. Growth in the tax base is expected to resume next year, but it will take years to return to pre-recession levels, according to Bonham.
Construction income, what those in the industry earn in wages and benefits, is projected to decline by 2.5 percent to $2.7 billion this year, marking the third straight year of declines. Construction income is forecast to turn positive in 2011.