Construction expected to lag in recovering from recession


March 15, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,McMillion Business Group STAFF GRAPHICS MARYLAND RELIES ON CONSTRUCTION JOBS OC MNC Financial STAFF GRAPHICS @Staff Writer

The economist would tell him to get a bus ticket. The construction company president would tell him to go into computers.

Meet John Duffy, 48-year-old husband, father and 19-year construction worker from Towson. His job has been gone since July. And he doesn't know whether it will ever come back.

"I'll be dead before I get back to work, it looks like," he said recently, with a small laugh. "1974 was the worst I'd seen it. People seem more hopeless this time. Guys are talking about retiring, getting into other lines of work. . . . I don't see much of anything in the near future. I'm talking about a couple of years."

The recession is over and the national economy is beginning to shake off its torpor, economists say. . But many construction jobs, especially those for ironworkers such as Mr. Duffy, will be among the last to come back. And Maryland has an added problem: It is more dependent on construction jobs than almost any other state in the union.

The Baltimore-Washington region lost 45,000 construction jobs in the 22 months through December, according to William Treacy, chief economist at MNC Financial Inc. Even so, more than 6.5 percent of the state's 2.1 million jobs came from construction in December -- a higher percentage than any other state but Nevada and 58 percent higher than the national average, according to a study by McMillion Business Group, a Washington consulting firm.

And even though the housing market is recovering, the construction sector overall still is expected to get weaker: Building permits for non-residential work in metropolitan Baltimore fell 90 percent in January, according to the Baltimore Regional Council of Governments. That's compared with January itself a "dismal" construction market according to the council, making this January the worst month in the past 10 years.

"You can expect construction employment to decline further," said Mr. Treacy. "It goes well beyond a cyclical downturn. . . . The construction industry is too big for this economy."

Charles McMillion, a former Johns Hopkins University economist who is president of McMillion Business Group, said some states lost more construction jobs than Maryland last year. But he doesn't expect local construction jobs to come back soon, and says construction's weakness could slow down Maryland's overall recovery.

"I can't ever see it being the engine it was in the 1980s. The key is to find new ones," Mr. McMillion said. If his brother-in-law were an unemployed construction worker, Mr. McMillion said, he would tell him to hop a bus to Nebraska, where the industry is healthier.

"Even if [construction] simply remains stagnant, it's a negative for Maryland because it was so positive in the 1980s," he said. "And we don't have anything to replace it."

Mr. McMillion said construction employment in Maryland grew extremely rapidly during the 1980s -- about 16.3 percent of all new jobs in metropolitan Baltimore from 1982 to 1989.

"That's just the direct jobs," not including spinoffs such as work for lawyers and accountants who represented developers, he said. "As a percentage of good jobs, it's considerably more."

He and Mr. Treacy agree on why that happened. Maryland had relatively high public works spending during the 1980s -- Oriole Park at Camden Yards and Baltimore's new light-rail system are examples. And the federal tax code encouraged more office construction than the market needed.

The federal government helped a lot, first by farm ing out to new or expanding companies in the suburbs much of the service work it used to do itself (that inspired the name "Beltway Bandits") and also by pumping money into defense contracts in the Baltimore-Washington corridor.

Together, government projects helped push construction jobs in Maryland and Virginia as a percentage of all jobs well over the national average.

"Construction was closely linked to an explosion in white-collar services," many of them provided to the government, Mr. Treacy said. "It created this huge demand for space. You had this explosive growth, which reinforced the white-collar business, which then grew more."

So construction got good, and when it's good it's very, very good. And when it's bad, it's awful. Brokers and developers expect no new office buildings in Baltimore before 1995 or 1996. Defense spending is down and is probably headed lower.

"In 1988 we probably had the potential to do $100 million worth of work," said Vincent G. Johnson, president of Riparius Construction Inc. in Timonium, who said his company has reduced its staff by about 50 percent over the last two years. "In 1991, we didn't see the potential to do more than $10 million or $15 million."

"There's no private development work out there at all," said Mr. Johnson, who said he advised his sons to get into the computer business rather than construction. "No private office buildings, no private retail, no private anything."

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