The US’ construction industry’s unemployment rate has hit 12.2% as the majority of contractors will cut back hiring, equipment if Washington officials are not able to avoid tax increases and spending cuts.
Construction employment declined by 20,000 jobs in November 2012, while the industry’s unemployment rate was 12.2%, according to an analysis of new federal data released by the Associated General Contractors of America. According to the results of a survey of member firms of the association, the construction employment figures reflect the fact many contractors have already cut staff and delayed hiring new employees because of the threat of the “fiscal cliff”.
Construction firms employed 5.514 million people in November, a decrease of 0.4% compared to 5.534 in October. The sector’s overall employment in November, at 6,000, was 0.1% lower than the previous year when firms employed 5.520 million workers.
Residential contractors lost 3,600 jobs in November, as residential building contractors lost 6,800 employees, while residential speciality contractors added 3,200 new workers. Non-residential building contractors lost 15,900 jobs in November. Non-residential speciality trade contractors lost 7,800 jobs, while non-residential building contractors lost 4,300 jobs. Heavy and civil engineering construction firms lost 3,800 jobs during the month.
According to an association survey of 551 construction firms carried out between 28 November and 6 December, the threat of the fiscal cliff’s tax increases and federal spending cuts are already having an impact on construction employment. 54% of firms say that the threat of tax increases has obliged them to adjust their business plans. 67% of these companies postpone hiring, 65% delay or cancel capital expenditures and 32% report layoffs.
If tax rates increase, about two-thirds of firms (63%) that have not yet taken any action say they will change their business plans in 2013. These changes include postponing or cancelling capital expenditures (62%), while 59% will delay hiring and 31% will reduce the size of their workforce.
Association officials noted that allowing personal income tax rates to increase would have a significant impact on many construction employers, since almost 70% of firms participating in the survey report they pay under the individual tax rate. Most of these firms are small – with 50 employees of fewer – and little capacity to absorb additional costs.
The USD 6 billion worth of cuts to federal construction programmes that are part of the “sequestration” cuts planned for next year have also impacted hiring and spending among construction firms. 39% of firms report those spending cuts have already obliged them to delay hiring, lay off staff and delay major expenditures. At the same time, 62% of firms that have yet to change their operations say they will make similar changes next year if spending cuts actually take place.