It’s Good Times for Contractors
The construction business was in such a deep slump a few years ago that contractor Ernie Ritchie was ready to abandon the industry and find a new way to make a living.
But on a recent weekday, Ritchie was busy supervising his crew of seven plasterers at the site of a new movie theater in Pasadena while preparing to take on new jobs in Simi Valley and Dana Point.
“It’s like night and day,” said Ritchie, 36, whose revenue is up 10% from last year. “There is a job on every corner you look at. I’m booked probably through March.”
After suffering through much of the decade, California’s construction industry is booming, with overloaded contractors turning down work and companies competing for skilled workers to build everything from tract homes to office buildings to theme parks such as Disneyland’s California Adventure project.
After lagging many other industries during the state’s economic recovery, construction has shifted into high gear just as other businesses--such as technology and manufacturing--show signs of beginning to slow down.
Based on October employment statistics compiled by the state, the pool of construction workers swelled by 54,000--or 9.5%--on a year-over-year basis. Nationwide, the expanding number of construction workers has helped offset a decline in the number of manufacturing jobs.
In Orange County, the building trade, which has added 20,000 jobs in the last five years, will continue to be one of the stars of the local economy next year, Chapman University economists predicted last week in their annual economic outlook. Construction jobs are expected to grow by 8.1% in 1999, the largest gain of any major jobs sector.
The rise in California construction activity this year--up about 14% above 1997 levels as measured by building permits--has rippled into related industries, boosting demand for everything from concrete to carpeting.
But perhaps most important, the state’s growing construction trade--which saw employment plummet by nearly 120,000 people during the early 1990s--has once again become a significant source of new, relatively high-paying jobs for blue-collar workers. Many of the same California workers who left or commuted out of state to build casinos in Las Vegas or tract homes in Phoenix have returned, industry observers say.
“Virtually all of them have come back now,” said William Rogers, business manager for Plasterers Local 200, which can boast nearly full employment for its Southern California members.
And despite a recent cooling off in real estate activity, there are still plenty of projects in the pipeline to keep construction crews busy for some time, contractors say.
Next year, for example, projects like the $2.4-billion Alameda Corridor--which will speed train traffic between downtown Los Angeles and the ports--and the expansion of Disneyland in Anaheim will kick into high gear and begin to generate jobs for iron workers, cement masons and crane operators. Construction is also scheduled to start next year on the long-delayed Playa Vista project near Marina del Rey.
“Things have tightened up,” said Robert Rivinius, chief executive officer of the California Building Industry Assn. “Getting subcontractors to come out and perform in a timely manner has gotten more difficult for builders.”
Several other major construction projects are scheduled to be launched in Orange County next year.
Among the most notable, the developers of Pointe Anaheim, a 650,000-square-foot retail, entertainment center across the street from Disneyland, say their project could be underway by the summer.
And construction of the final phase of the Irvine Spectrum Center, another entertainment and shopping complex, may also be launched in late 1999. That 400,000-square-foot project will expand the size of the center to nearly 1 million square feet.
Meanwhile, the Mission Viejo Mall continues its renovation, which includes the construction of a large parking structure and a new Nordstrom Department Store.
Several highway construction projects also are in the works, including the $1.1-billion project to widen and improve the Santa Ana Freeway.
Demand has been heaviest in Northern California, which led the state out of the recession and where developers have broken ground on scores of office parks, downtown hotels and high-rises, said Bill Johnstone, western regional director for the giant construction firm Bovis.
“From San Jose to San Francisco, it’s a hot market right now,” said Johnstone, whose company is involved in a huge expansion project at San Francisco International Airport as well as construction of a new Four Seasons hotel in downtown San Francisco.
Construction activity in Southern California, meanwhile, has picked up speed in the last year.
“It really happened pretty fast,” said Rogers of the plasterers union. “Eight months ago, we saw the signs of it beginning. When the rains stopped, it all just broke loose.”
Richard Slawson, executive secretary of the Los Angeles and Orange Counties Building & Construction Trades Council, estimates that unemployment among construction workers in Southern California has plunged from as high as 25% during the depths of the recession to about 5% today.
Raymond Interiors Systems, a large contracting firm based in the City of Orange, has lost about 30 plasterers and drywallers to rivals in the last six months, said company Vice President Gary Paoli. The workers most in demand are experienced foremen, who have been lured away with wages at least $5 an hour above scale.
“They are bidding for them like fancy racehorses,” said Paoli, whose firm employs more than 250 workers in Southern California.
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Building Momentum
The rebound in California’s construction industry employment has picked up recently as businesses have been expanding and new-home sales have risen dramatically. Average construction industry employment:
Los Angeles / Long Beach Metro Area: 1997: 110,000
Orange County Metro Area: 1997: 58,000
California: 1997: 554,300
Building Boom
Orange County construction employment, which has been going up since 1994, will jump 39% during the next five years. The growth rate in construction jobs, which blasted into high gear last year, will continue this year and then slow down a bit. Even so, the growth in construction jobs will outpace overall increases in employment.
*--*
Payroll Employment 1994 47,300 1995 49,725 1996 52,500 1997 58,000 1998 63,924 1999 69,099 2000 73,990 2001 77,822 2002 82,620 2003 88,650
*--*
Job Growth (from previous year)
*--*
Construction Total payroll 1994 6.4% 1.0% 1995 5.1 2.2 1996 5.6 2.8 1997 10.5 3.8 1998 10.2 3.8 1999 8.1 5.6 2000 7.1 2.7 2001 5.2 3.0 2002 6.2 2.1 2003 7.3 2.6
*--*
Healthy Indicators
Home-building activity will help generate construction industry jobs. Sales of building materials had trailed gains in taxable sales overall in recent years but surged ahead last year and are expected to continue to grow faster:
Homes Built
*--*
Year Homes 1997 12,251 1998 12,058 1999 13,224 2000 13,202 2001 14,262 2002 15,139 2003 16,762
*--*
Taxable Sales Increases
(from previous year)
*--*
Building materials Total sales 1994 1.6% 5.4% 1995 2.9 5.9 1996 7.4 8.6 1997 13.8 7.3 1998 12.4 6.2 1999 7.9 5.2 2000 8.2 5.7 2001 8.1 6.7 2002 9.0 5.7 2003 9.8 6.3
*--*
Note: 1998 figures are estimates; 1999 and beyond are forecasts
Source: Chapman University Economic & Business Review
