Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president said are “at the heart of our effort to accelerate job growth.”

Construction spending would be a key part of the Jobs for Main Street Act, a $75 billion second stimulus to revive the nations lethargic unemployment rate and improve the dismal job market for construction workers. The House approved the bill 217-212 last month after House Speaker Nancy Pelosi, D-Calif., worked the floor for an hour; the Senate is expected to consider it later in January.

APs analysis, which was reviewed by independent economists at five universities, showed that strategy hasnt affected unemployment rates so far. And theres concern it wont work the second time. For its analysis, the AP examined the effects of road and bridge spending in communities on local unemployment; it did not try to measure results of the broader aid that also was in the first stimulus like tax cuts, unemployment benefits or money for states.

“My bottom line is, Id be skeptical about putting too much more money into a second stimulus until weve seen broader effects from the first stimulus,” said Aaron Jackson, a Bentley University economist who reviewed APs analysis.

Even within the construction industry, which stood to benefit most from transportation money, the APs analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.

“As a policy tool for creating jobs, this doesnt seem to have much bite,” said Emory University economist Thomas Smith, who supported the stimulus and reviewed APs analysis. “In terms of creating jobs, it doesnt seem like its created very many. It may well be employing lots of people but those two things are very different.”

Transportation spending is too small of a pebble to quickly create waves in the nations $14 trillion economy. And starting a road project, even one considered “shovel ready,” can take many months, meaning any modest effects of a second burst of transportation spending are unlikely to be felt for some time.

“It would be unlikely that even $20 billion spent all at once would be enough to move the needle of the huge decline weve seen, even in construction, much less the economy. The job destruction is way too big,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.

Few counties, for example, received more road money per capita than Marshall County, Tenn., about 90 minutes south of Nashville.

Obamas stimulus is paying the salaries of dozens of workers, but local officials said the unemployment rate continues to rise and is expected to top 20 percent soon. The new money for road projects isnt enough to offset the thousands of local jobs lost from the closing of manufacturing plants and automotive parts suppliers.

“The stimulus has not benefited the working-class people of Marshall County at all,” said Isaac Zimmerle, a local contractor who has seen his construction business slowly dry up since 2008. That year, he built 30 homes. But prospects this year look grim.

“The problem were seeing is, unfortunately, when they put those projects out to bid, there are only a handful of companies able to compete for it,” Zimmerle said.

The Obama administration has argued that its unfair to count construction jobs in any one county because workers travel between counties for jobs. So, the AP looked at a much larger universe: The more than 700 counties that got the most stimulus money per capita for road construction, and the more than 700 counties that received no money at all.

For its analysis, the AP reviewed Transportation Department data on more than $21 billion in stimulus projects in every state and Washington, D.C., and the Labor Departments monthly unemployment data. Working with economists and statisticians, the AP performed statistical tests to gauge the effect of transportation spending on employment activity.

There was no difference in unemployment trends between the group of counties that received the most stimulus money and the group that received none, the analysis found.

Despite the disconnect, Congress is moving quickly to give Obama the road money he requested. The Senate will soon consider a proposal that would direct nearly $28 billion more on roads and bridges, programs that are popular with politicians, lobbyists and voters. The overall price tag on the bill, which also would pay for water projects, school repairs and jobs for teachers, firefighters and police officers, would be $75 billion.

Source

“The magnitude of the downturn has set in,” Kermit Baker, the groups chief economist, said in an interview. This years expected drop compares with a decline of about 20 percent in 2009. “Another bad year is the bottom line, but there are some prospects of recovery as we get into 2011.”

U.S. commercial real estate values sank to the lowest level in seven years in October as job losses cut demand for apartments, offices and retail space, Moodys Investors Service Inc. said last month. Office vacancies may approach 20 percent in 2010, according to Jones Lang LaSalle Inc. and Grubb & Ellis Co. Unemployment was 10 percent in November after a 26-year high of 10.2 percent the prior month, the Labor Department said.

Commercial construction spending will probably have a “marginal increase” of 1.8 percent next year, according to the architects group.

That forecast “still implies a weak first half of 2011 and a stronger second half,” Baker said.

Industrial construction spending is likely to slump the most this year, 24 percent, and an additional 7.8 percent in 2011, the institute said.

The group expects hotel building to also fall about 24 percent this year, before rising 5.4 percent in 2011.

Spending on office buildings may drop 19 percent this year and then increase 12 percent in 2011, while retail construction is likely to decline 17 percent this year before climbing 3.2 percent next year, the group said.

The AIA Consensus Construction Forecast uses projections from sources including Moodys Economy.com, the Portland Cement Association and management-consulting firm FMI Corp. The report, issued twice a year, forecasts U.S. construction spending over 12 to 18 months.

Source

Even as Detroit tries to gain traction with new small cars and electric vehicles in a government-mandated shift toward greater fuel economy, it needs to sell more Rams, Chevrolet Silverados and Ford F-150s. Pickups often sell for $30,000 or more and typically command higher prices and generate more profits than small and midsize cars. They account for 22 percent of sales for the Detroit Three. Until pickup sales rebound, steady profits and solid financial footing will likely prove hard to come by.

Haner and others have reason to be cautious. While October new home sales were up 6.2 percent over September, construction of homes and apartments fell a larger-than-expected 10.6 percent, and building permits, a key indicator of future construction, slid 4 percent.

“Im not inclined to take on any more exposure until I see that the building-housing market is thoroughly back out of recession,” Haner said Wednesday after the Commerce Department released the latest reading on new home sales.

“Right now, construction companies are going out of business,” said Erich Merkle, president of the auto industry consulting firm autoconomy.com in Grand Rapids, Mich. “And those companies that are surviving are making do with the existing fleet.”

The housing slump has pushed U.S. pickup sales downward for the past three years. Sales routinely topped 200,000 per month as recently as 2007, but in February they fell to less than 89,000, the low point for the year. Theyre off 32 percent from the first 10 months of 2008, according to Wards AutoInfoBank. Ford, Chrysler and GM combined to sell 843,000 pickups through October.

In Las Vegas, once among the hottest housing markets in the nation, building declined rapidly in the recession and is just starting to show signs of recovery, Haner said.

His work force surged to 25 during the boom years earlier this decade, but now its down to six. He paid off three of his trucks in 2007 while business was still good, and hes maintained them so theyll last.

With the casual truck buyer all but out of the market, automakers have been offering big incentives such as zero percent financing to entice contractors out of their bunkers. But like Haner, most are not budging because of uncertainty about a housing recovery.

The big drop in October home construction numbers brought fears of a double-dip recession in the industry and warnings that 2010 may still be sluggish for the sector. Yet inventory in October dropped to the lowest level in nearly four decades, leading at least one housing industry analyst to predict that builders will be swinging their hammers soon.

Mike DiGiovanni, General Motors top sales analyst, said the automaker still projects an upward trend in new housing into the fourth quarter of next year.

Pickup sales are particularly critical to GM. The Chevy Silverado is by far the companys top-selling vehicle. Even in the recession, GM sold 261,142 Silverados through October, but thats 35 percent fewer than in 2008.

Markets like Las Vegas have seen prices drop for 12 straight months. But prices have risen for at least six consecutive months in Denver, Washington D.C. and Chicago, according to the Standard & Poors/Case-Shiller index of 20 major cities.

Nationally, the median price of a new home was $212,200 in October, almost even with $213,200 a year earlier, but up almost 1 percent from Septembers level of $210,700.

“We do think that as we move into next year, residential investment is going to become a small positive for the economy,” DiGiovanni said.

Merkle predicts that housing, and pickup sales, will lag behind the rest of the economy in recovering but still show small improvements next year. But it may take until late next year before contractors like Haner feel safe enough to buy new pickups.

Haner may replace his own Ram pickup because his dealer is offering zero-percent financing. But he plans to run the three company pickups, one of which is nearly six years old, for 250,000 miles or more. A 2004 model has only about 60,000 miles on it, he said.

Source

Construction of single-family homes rose in July for the fifth straight month, edging up almost 2 percent to the highest level since last October, the government said Tuesday. Building permits climbed nearly 6 percent.

Each new home built creates about three jobs on average and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.

With new construction up 37 percent from its low point this winter, the industry is expected to help the overall economy this quarter for the first time in three and a half years.

“Housing is no longer a drag,” said Mark Vitner, a senior economist with Wells Fargo. “Thats a good thing.”

Of course, the housing industry is coming back from the worst recession since the Great Depression, and construction is still more than 70 percent from its 2006 peak. So the impact from hiring and spending on materials like wood and concrete is modest.

In addition, hammers are silent at construction sites for apartment buildings. For developers, it makes little sense to build when there are so many vacant homes and condominiums for rent. Apartment construction fell 13 percent from June to July.

That pulled the combined construction rate for homes and apartments down 1 percent to a seasonally adjusted annual rate of 581,000 units, from 587,000 in June. Economists polled by Thomson Reuters expected 600,000.

There are still several threats to the recovery of the U.S. housing market.

The unemployment rate, now 9.4 percent, could surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still at historic lowers but could rise, making homes less affordable. Foreclosures are still at record highs.

And July was the last month that most builders could start new homes and have first-time buyers qualify for a new tax credit. Buyers can save 10 percent on the price of a home, up to $8,000 in taxes, if they complete the purchase by the end of November.

Builders and real estate agents are pressing in Congress for that credit to be extended. If it isnt, sales could easily slump again.

On Tuesday, Pulte completed its acquisition of Centex Corp. for $1.53 billion in stock, becoming the largest homebuilder in the country.

One of the reasons for the purchase was Centexs focus on more affordable homes. Since the housing bubble burst, many builders have shifted to smaller houses that can be sold at lower prices to woo first-time homebuyers. The median sale price for a new home was $206,200 in June, almost $30,000 cheaper than a year earlier.

More homebuyers also means more business to retailers like Home Depot Inc., which on Tuesday posted its first annual increase in quarterly sales transactions in five years. Better still, the retailer saw improvements in Florida and California, two of its most important - and troubled - markets.

Sales of new homes have posted monthly increases since April. The Commerce Department reports on July new home sales numbers Aug. 26. Sales are expected to rise roughly 2 percent, according to economists surveyed by Thomson Reuters.

—

Source

“Weve had a really rocky six months in the economy and in the construction sector,” Kermit Baker, the institutes chief economist, said in a telephone interview. “People are seeing a real tough environment out there and not a lot of incentive to invest in projects.”

Sentiment among U.S. consumers dropped this month as the countrys unemployment rate approached 10 percent, according to a Reuters/University of Michigan preliminary index. The economy probably shrank at a 1.8 percent rate from April to June, according to a Bloomberg News survey. Nonresidential construction tends to lag behind the economy, Baker said.

Spending on office buildings is forecast to sag 22 percent this year and 17 percent in 2010, while retail construction probably will sink 28 percent this year and 13 percent in 2010, the architects group said.

Looking for Signs

“Why do you build new office buildings? You need to see job numbers pick up,” Baker said. “Why do you build new retail centers? You need to see consumer spending pick up.”

Hotel construction is likely to decline 26 percent this year and 17 percent in 2010, the institute said. Industrial spending is forecast to dip 0.8 percent this year and 28 percent in 2010, according to the report.

The Consensus Construction Forecast uses projections from sources including Global Insight Inc., Moodys Economy.com, the Portland Cement Association and management consulting firm FMI Corp. The report forecasts U.S. construction spending, adjusted for inflation, over the coming 12 to 18 months.

Source

Sales of Deeres green-and-yellow equipment slid 17 percent, sapped by a global slowdown that has dampened construction and dragged down crop prices. The sharpest sales declines occurred outside the United States and Canada, where Deere has expanded quickly in recent years. Deere said market conditions remain uncertain.

“Clearly, operations dependent on construction activity and consumer spending are feeling the full impact of the sharp downturn,” Robert Lane, Deeres chairman and chief executive officer, said in a statement.

Farmers have grown cautious about buying new equipment as prices for corn, wheat and other crops have fallen from record levels last year. Costs of fertilizer and fuel, meanwhile, remain relatively high. And the global credit crunch has made it more difficult to get loans.

The problems in Deeres agriculture markets have compounded the pain of a construction slump and a U.S. recession that has stifled spending on products like lawn care equipment.

As a result, the Moline, Ill.-based company cut its 2009 net income forecast to $1.1 billion, down from $1.5 billion expected in February and almost $2 billion predicted late last year.

It expects a 19 percent drop in equipment sales to contribute to the decline, with farm machinery sales flat or slightly down in North America, down 10 to 15 percent in western Europe and sharply lower in central Europe. Farm machinery sales in South America, where farmers have struggled with a drought, are seen plunging 20 to 30 percent.

Turf equipment and small utility tractors could sink about 20 percent in North America.

Construction and forestry sales are expected to drop about 42 percent, hit by historically low levels of construction in the United States. Deere also predicts lower profit from its credit business.

The company reported fiscal second-quarter earnings of $472.3 million, or $1.11 per share, down from $763.5 million, or $1.74 per share, a year earlier.

Revenue fell 17 percent to $6.75 billion.

Wall Street had expected earnings of $1.07 per share on revenue of $6.60 billion

Investors may be heartened by a Deere forecast of higher farm receipts next year, suggesting “perhaps a better year than anticipated,” said Lawrence De Maria, an analyst with Sterne, Agee & Leach.

And inventories in Deeres construction equipment business, which lost money during the quarter, are about half the industry average, “so theyre running the business pretty well,” he said.

To cope with weaker demand, Deere has cut production and laid off more than 1,000 workers this year, though it recalled 68 workers last month.

Deere scaled back global production by 19 percent during the quarter, partly reflecting weak demand for small- and medium-sized agricultural equipment. It expects production to fall about 22 percent for the year.

It also combined its agriculture equipment division with its commercial and consumer business to cut costs and streamline operations. The restructuring, along with news of layoffs and the worker recall, apparently buoyed investors hopes, driving Deere stock up 63 percent between early March and the end of April.

Source

Sales sank 45 percent at General Motors Corp., 30 percent at Ford Motor Co., 25 percent at Honda Motor Co. and 23 percent at Toyota Motor Corp.

“Everything we can tell about the economy just got weaker,” said Stuart G. Hoffman, senior vice president and economist for The PNC Financial Services Group. The manufacturing report confirmed the economy is falling deeper into recession, Hoffman said.

The manufacturing index had been hovering near what economists call “the boom-bust” line for most of the year until its sharp fall in September brought it to the lowest level since the aftermath of the Sept. 11 attacks.

Octobers reading of 38.9 was sharply below the September figure of 43.5 and lower than economists expectations of 41.5, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.

Manufacturers, already hurting from declines in construction and consumer spending, were further battered by the credit crisis and gulf coast hurricanes.

Martin Marietta Materials Inc., which supplies granite, limestone, sand and gravel to builders, last week slashed its 2008 earnings guidance, saying it expects to earn between $4.25 and $4.65 a share, down from August guidance of $5 to $5.65 a share.

“Over the past 45 to 60 days, the lack of available business credit has stalled construction activity and further affected demand for our products,” the company said. “Construction projects under way have had credit effectively pulled, and new projects are subject to increasingly tighter lending standards.”

The overall unemployment rate was 6.1 percent in September for the second straight month, the highest its been in five years. Manufacturing workers have been hit especially hard.

Steelmaker ArcelorMittal this week idled its Cleveland plant, which has 1,450 union employees, as demand declined. Mobile phone maker Motorola Inc. last week reported a third-quarter loss and said it would cut 3,000 jobs by April. And General Motors Corp. last week said it was extending the deadline for white-collar workers to accept early-retirement packages, saying layoffs are probable.

Mondays figures were the latest in a string of grim economic indicators.

The Commerce Departments report on construction spending Monday showed a 0.3 percent decline in September, the third drop in the past four months.

The construction decline was better than the 0.8 percent drop economists had expected. But it left total building activity at an annual rate of $1.06 trillion in September, down 6.6 percent from the year-ago level.

Wall Street ended with a narrowly mixed performance Monday. The Dow Jones industrial average fell 5.18 to 9,319.83. The broader Standard & Poors 500 index fell 2.45 to 966.30, while the Nasdaq composite index rose 5.38 to 1,726.33.

—

AP Business Writers Martin Crutsinger in Washington, Bree Fowler in New York and Tom Krisher in Detroit contributed to this report.

Source: casrp