Practical Welding Today - May/June 2009

Economic stimulus money a long way from being a quick fix

By Allen Zeyher

The good news about a worldwide recession is that steel prices are back down from their record highs of 2008. The Producer Price Index for hot-rolled bars, plates, and structural shapes, which includes a lot of bridge steel, dropped 7. 5 percent from February 2008 to February 2009.

“The extreme fluctuations last year reflected the high state of demand worldwide for steel and also the high transport costs and high fuel, or energy, costs in the first half of the year,” said Ken Simonson, chief economist for the Associated General Contractors of America.

“And then all of those things collapsed in the space of a very few months,” Simonson continued. “For 2009 I think demand is going to be quite weak, but at the same time, steel producers have been banking their fires and ratcheting back production, so my guess is that steel prices are going to remain fairly close to current levels for the next several months.”

Unfortunately for companies that depend on steel-bridge work, it looks like it may take some time to feel any of the benefits of President Obama’s American Recovery and Reinvestment Act (ARRA).

“Certainly, the stimulus bill is a huge shot in the arm for highway construction, broadly speaking,” said Simonson. “It remains to be seen how much of the $27.5 billion for highways will go into bridges.”

Spending on bridge construction happened at a seasonally adjusted annual rate of $23.3 billion in February 2009, down 5. 3 percent from the rate in February 2008, according to the U.S. Census Bureau.

“I haven’t really seen anything hit the street in terms of anything of any real size or consequence,” said James Merrill, a vice president

and senior principal at MACTEC Engineering and Consulting, San Diego.

Merrill’s perspective was echoed by David McQuaid of D.L. McQuaid & Associates Inc., Bethel Park, Pa.

“All of the work I have is on contracts that have already been awarded.”

McQuaid consults on welding fabrication jobs on steel bridges. He said that before he is called in on a project, the design has to be in place, along with engineering drawings and written specifications, so he usually is working on contracts that were awarded six to 12 months earlier.

He said he thought stimulus money would eventually reach the level of his business—“sooner or later it will trickle down”— but not yet.

Bill McEleney, regional director of the National Steel Bridge Alliance, was pessimistic about a recovery at all this year.

“So far this year I would say we haven’t seen any significant improvement over last year, and last year was not a particularly good year,” said McEleney.

“I don’t think that this year is going to be any better than last year. A little bit of stimulus money will come along and maybe help a little bit. That might just offset the lack of work that would have come otherwise.”

One reason McEleney does not expect a significant boost from ARRA is that he has not seen much steel-bridge superstructure work getting under way as a result of stimulus funds. As a percentage of work in the steel-bridge sector in a normal year, the stimulus has not added much.

“I’m a little slower than I was this time last year, but I am getting inquiries,” said McQuaid. “I don’t think it’s as busy as last year, but there’s a reasonable amount of work out there that I’m able to get my share of.”

One-eighth Downgrade

The employment picture for construction also looks pretty bleak.

“One out of eight construction jobs has disappeared in the last year, from March 2008 to March 2009. Within heavy and civil engineering construction, it’s had the smallest decline of the five categories, but it’s still down quite sharply, 8. 4 percent,” Simonson said.

In February 2009, 244,000 people were working in highway, street, and bridge construction, 9. 6 percent less than in February 2008, according to the Bureau of Labor Statistics

“I think the stimulus money will certainly help cushion any further decline, but at the same time we’re seeing severe cutbacks in state budgets for all types of construction, and in particular for road and bridge construction as the state revenue sources that are dedicated to that shrink even below the reduced estimates of a few months ago,” Simonson said.

Receipts from sources such as gas and diesel fuel taxes and auto registration fees are still falling. “So I think state-funded projects are still going to be on the chopping block. Whether the stimulus money will be enough to offset those declines really depends on how the economy fares in the next few months and how successful the states are in getting these stimulus contracts awarded,” Simonson added.

States are required to obligate at least half of their economic stimulus funds under ARRA by June 30.

McQuaid sees another employment concern—the declining number of skilled welders. He thinks many older, skilled welders will be retiring in the years to come, and the industry may face a shortage if it does not quickly develop enough younger, skilled welders.