February 1, 2010

2010 looking up for industry: Construction Sector Council

RICHARD GILBERT

staff writer

The construction industry in B.C. and Alberta is heading for a soft landing at the end of a relatively mild recession for the industry, according to the Construction Sector Council (CSC).

The council released a preview to its 2010 national labour forecast, which covers the early results of this year’s round of construction labour market consultations with a focus on the business cycle from 2009 to 2012.

“The story with B.C. and Alberta is that they were very busy when the recession hit and the demand for work came down to a more manageable level,” said George Gritziotis, executive director of the CSC.

“The good news is we still kept people employed because of the buffer of stimulus.”

The preview said the recession spread quickly across all construction sectors, as building and employment collapsed between October 2008 and July 2009.

B.C. and Alberta reported some of the greatest construction employment declines in the country, but the industry had time to recover.

Gritziotis said two factors are the key to the construction industry’s soft landing.

“The first is demographics, because there were less people in the labour force,” he said.

“The other factor is stimulus spending which contributed to the lower unemployment rate. We are experiencing a very favourable unemployment rate in construction during the recession.”

As part of the CSC’s consultation with industry, they developed a forecast scenario that calculates the impact of stimulus spending on construction employment.

The 2010 CSC forecast assumes that 20 per cent of the stimulus spending will take place in 2009, 50 per cent in 2010 and the remaining 30 per cent in 2011.

“Clearly this type of activity will continue to keep construction busy and allow us to experience a recovery,” said Gritziotis.

“This was a consensus view across the country.”

Even when some of the government announcements are discounted, the stimulus is significant and far exceeds any of the counter-cyclical measures used in earlier recessions.

“One of the most interesting trends is if you look at what construction experienced in the last couple of recessions and in this recession,” explained Gritziotis.

“Unemployment rates in construction were at 20 per cent in the last two recessions in 1981 and 1990 and for seasonal people the rate reached 30 per cent. In this recession the peak was 11 per cent.”

In B.C., government stimulus combined with several industrial projects that are underway will help sustain growth in non-residential construction until 2010.

In the manufacturing sector, the construction of the $3.5 million Rio Tinto Alcan smelter modernization project is projected to begin in 2011.

As well, a number of pipeline projects are underway or announced.

There are several substantial investments taking place in utilities with several wind farms and hydroelectric facilities completing construction over the medium term.

The B.C. Government’s 2009 budget announced a $14 billion infrastructure stimulus program, including $2 billion cost-shared with the federal government over three years, $10.6 billion under the province’s three-year capital plan, and $1.4 billion in projects in partnership with local governments and the federal government.

These expenditures focus on social housing, hospitals, schools, roads, bridges and community buildings.

In Alberta, the recession, collapse of oil prices and sharp increases in capital costs caused many major oilsands projects to be delayed or cancelled.

However, conditions are improving with the recent announcement of increased activity, including Firebag Stage 3, Kearl Lake and Horizon Phase 2. Manufacturing projects are planned, and recently completed pipeline projects will contribute to this year’s output.

The 2009 Alberta budget announced a 2009-2012 capital plan with a commitment of $23.2 billion in spending.

This included $5.8 billion for new schools, health and postsecondary facilities and renovations; $5.8 billion for provincial highway improvement; $5.2 billion for municipal infrastructure projects; and $5.3 billion for carbon capture, environmental projects, community facilities, maintenance and upgrades to provincial parks.

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