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Area construction employment surging: Workers stay busy as industry experiences 15 consecutive months of job growth

May 22, 2006

Building tradesmen in central Indiana don't need a mind-numbing jobs report to tell them construction workers are in high demand. They need not look any further than their apprentice programs and union halls to gauge the industry's health.

The way the barometer works is simple: Full apprentice classes mean contractors are hiring and empty union halls mean they're working.

"When the benches are empty, that's a good thing," said Mike Kerr, a principal at locally based contractor F.A. Wilhelm Construction Co. Inc. "Things are looking good. We're on the upswing."

Indeed, both the nation and Indiana are reporting strong construction activity. An April report from the Bureau of Labor Statistics showed seasonally adjusted payroll employment in construction reached 7.51 million nationally, a 3.7-percent increase from a year ago.

The April jump represents the 15th straight month the construction industry has added jobs, while growing twice as fast as all other non-farm sectors combined, according to a report from the Washington, D.C.-based Associated General Contractors of America.

Indiana is reporting strong numbers as well. Construction employment in March reached 149,200, an increase of 1,700 from last year and the highest it's been since 2000. Jobs within the industry since then had steadily declined in the state before rebounding in 2004.

"Construction, as a sector, is doing very, very well," said Patrick Barkey, an economist and director of policy study at Ball State University's College of Business. "It follows the economy. Building activity can obviously fall when interest rates go higher."

The Federal Reserve bumped the federal funds rate a quarter-point, to 5 percent, on May 11, marking the 16th consecutive increase in the past two years. The rate is the interest banks charge one another on overnight loans.

Even before the rate hike, builders had started work in March on the smallest number of new homes in a year, as rising mortgage rates and record inventories of unsold homes discouraged new projects.

Housing starts declined 7.8 percent in March to an annual rate of 1.96 million, the Commerce Department said. Building permits, an indicator of future construction, fell 5.5 percent, to an annual rate of 2.05 million.

Commercial contractors in the metropolitan area, though, have a reason to smile. The $1 billion midfield terminal at Indianapolis International Airport, the $950 million Lucas Oil Stadium and Indiana Convention Center expansion, and Indianapolis Public Schools' $832 million capital improvement campaign are among the large-scale projects under construction.

And that's just the tip of the iceberg. Expansions to the Eli Lilly and Co. technology center and the Indianapolis-Marion County Public Library Central Branch both are well under way, as are several area school projects.

The load, however, is not to the point where it is taxing contractors and causing significant worker shortages, said John Griffin, executive director of the Central Indiana Building and Trades Council.

"There's an increase in construction employment, there's no doubt about it," he said. "But it's not actually taken off yet, where it's overwhelmed the unions."

J.R. Gaylor, president of the Associated Builders & Contractors of Indiana, a group that represents non-union contractors, said enrollment in its apprenticeship programs is increasing. Classes begin in August.

"To put people in a four-year program is a big investment," he said. "That's a sign they are making an investment in somebody long term and they're going to be gearing their work force up."

Yet, some construction markets are performing stronger than others.

Retail-based projects will help carry central Indiana contractors through the year, said Jennifer Coskren, an economist at Massachusetts-based McGraw-Hill Construction, an industry publication group.

Ground is scheduled to break this summer on a Home Depot and three Wal-Mart supercenters, including one on Lafayette Road. That should offset the dearth of activity in the office building and industrial markets, she said.

Through April, construction of office space was down 56 percent from the same time last year, according to McGraw-Hill reports.

Simon Property Group Inc.'s $55 million headquarters, which should be finished in September, contributed to last year's bounce in office activity.

"There's not a lot to suggest there will be a turnaround," Coskren said. "Retail is where the growth will be this year."

Another normally strong performer, the warehouse market, also is suffering this year after a strong performance in 2005.

A 750,000-square-foot distribution center was completed in April for printer maker Epson America Inc. on 80 acres along Stafford Road in Plainfield. And locally based Lauth Property Group built a 667,000-square-foot distribution center in Greenwood.

Any decline in building activity is considered a mere blip in an overall strong market.

"Central Indiana has been predicted to be the next big hot spot for construction," Griffin said, "and I'd love to see it."
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