The start of work on Honolulu’s mass-transit line will be a major factor — but not the only reason — Hawaii’s construction industry will rebound this year from a two-year decline, according to a new industry forecast.

A report by the University of Hawaii Economic Research Organization released today projects that construction spending statewide will rise 3.6 percent this year to $5.6 billion while industry employment grows by 3.7 percent, or 1,100 jobs, to 31,000.

The expected gain would be less, but not wiped out, if construction on the estimated $5.5 billion rail project is delayed significantly.

"There’s a lot of other stuff going on out there — state, county, military and nonresidential commercial construction," said Carl Bonham, UHERO’s director.

This is the first time UHERO has included anticipated contributions from the rail project in one of its economic forecasts. Previous reports excluded any rail effects because the contentious project was much more tentative.

Since UHERO’s last report in September, the Federal Transit Administration gave its blessing to the city’s environmental impact statement, and a critical review promised by Gov. Linda Lingle was exchanged for quick approval by Gov. Neil Abercrombie, who took office in December.

Still, there’s uncertainty whether construction will start next month or soon afterward as the city had hoped, given that a lawsuit was filed Monday to prevent construction until potential native Hawaiian burials are mapped out along the 20-mile route through an archaeological inventory survey.

"If rail holds the best near-term prospects for Oahu construction, it also presents a substantial risk," the UHERO report said. "It is impossible at this point to know whether rail work will ramp up quickly, as envisaged in official (city) estimates, or whether legal challenges or other factors will delay progress."

Bonham said the contribution from rail on construction jobs could represent close to half the forecasted gain this year, if the project begins quickly.

Other government projects driving the anticipated construction industry rebound include sewer upgrades, state harbor modernization work, military housing redevelopment and school maintenance. UHERO forecasts that the value of government construction contracts in Hawaii will surge 60 percent this year and double by 2013, compared with last year.

"Even without rail, other large infrastructure projects would raise government contracting well above the average outlays of recent years," the report said.

In the private sector, construction permits are forecast to rise by only 5 percent, as relatively high commercial real estate vacancies, difficult financing and rising home foreclosures deter developers from building more commercial and residential projects. UHERO expects a moderate rise in residential development will begin next year.

General risks that could dampen industry growth this year include possible surges in energy costs and interest rates, UHERO said.

More robust growth in Hawaii’s construction sector is expected for 2012 and 2013. UHERO forecasts spending will surge about 23 percent in each of those years.

Job growth is forecast at 6.3 percent, an increase of 1,900 jobs, in 2012, and 7.7 percent, or 2,600 jobs, in 2013.

UHERO expects the rail project will boost construction jobs by 5,000 to 5,500 at the estimated peak of the project in 2013-14. That would be enough jobs to shave off half a percentage point from statewide unemployment, UHERO said.