No light at the end of the tunnel - construction industry - includes related article

New Mexico Business Journal, Nov, 1991 by Arlene Cinelli Odenwald, Dennis Roberts

Some still believe there's comfort in numbers when everybody in your business seems to be in the same boat.

Tell that to an unemployed construction worker or an executive of one of New Mexico's construction companies and you'll find that they don't feel comforted at all.

The construction industry is sitting on the edge of its seat, hoping a mild charge in the housing sector may foretell the long-hoped-for turnaround in the down cycle.

Although contracting in the second quarter of this year was merely 2 percent higher than the previous quarter, the statistic is important, because it notes a change in direction.

But it was spotty, reported the president of the National Association of Homebuilders. "It was weak and spotty compared to previous cycles," he said.

Take a look, though, at some of the construction statistics about New Mexico that support the industry-wide recession.

Comparing 1980 to 1990, total construction projects were down 17.7 percent. From '89 to '90, projects were down 11.2 percent.

Nonresidential construction from 1980 to 1990 was down 18 percent and from '89 to '90, it was down even more, 19.7 percent.

Nonbuilding construction in the state was down 43 percent from 1980 to 1990; from '89 to '90, it was down only 12.6 percent.

Residential construction was the only bright statistic. From '89 to '90, residential was up 18 percent, but from '89 to '90, it slid down 3.5 percent.

The value of contracts in New Mexico was down by 17.7 percent over the last decade. From '89 to '90, contract values went down 11.2 percent.

"More than 8,000 construction workers have left the state," says Donald Power, president of Jaynes Corporation in Albuquerque.

Jaynes and Bradbury & Stamm in Albuquerque are the only two New Mexico companies listed in Engineering News Records' top 400 national construction companies.

"This is the slowest it's been in the last three years," says J.B. Pruett, president of Wooten Construction Co., in Las Cruces. One of the things Wooten Construction noticed the beginning of this year was no private money for projects coming on line.

Pruett says his company changed from building buildings to building bridges because of the recession, and entered into areas of specialization. That meant, he says, that the more difficult a project, the more profitable it can be.

Jaynes Corporation also expanded its customers and projects, seeking contract work in Arizona and Nevada.

Power says during difficult times, there isn't a construction company that doesn't tighten its belt in terms of taking a more critical look at overhead, at its staff, at anything else that will help a company survive a cyclical recession.

Jaynes did $850 million worth of nonresidential work in '86 compared to $325 million worth in '90.

And during leaner times, there are fewer opportunities for companies, no matter how they run their business, says Power.

Bradbury & Stamm meanwhile sought business in the southern part of the state. "We see El Paso, Texas, too, as an emerging market," says Bob Turner, the firm's marketing director.

Bradbury & Stamm, for instance is opting to do most of the work through subcontractors rather than through company laborers.

FIRST TIME BUYERS
Despite the real-estate slump, the percentage of first-time
home buyers increased in 30 states last year. The leaders:
                                Increase    Percent
                                1989-90     in 1990
Vermont                         10%         45%
Connecticut                     8%          59%
Rhode Island                    7%          57%
Maryland                        6%          56%
New Hampshire                   5%          45%
West Virginia                   5%          36%
New Mexico                      5%          34%
Kentucky                        4%          38%
Massachusetts                   4%          56%
Virginia                        4%          44%
USN&WR -- Basic data: Century 21 Real Estate Corp. Courtesy New
Mexico Mortgage Finance Authority

"It's much harder to maintain a large body of laborers on the payroll in a down market," notes Turner.

From the mid to late '80s, Bradbury & Stamm did about $70 million worth of business; this year, the company has done $55 million over last year, says Turner.

New Mexico firms have had to impose cost-cutting measures. Pruett with Wooten Construction says his company has not stopped hiring, but has not replaced some employees who have left.

"We rearranged our overhead to meet the demands of the industry recession," he says, "and we have had to cut costs here and there."

Construction employment in New Mexico has now declined for 21 consecutive quarters, according to New Mexico Business last June.

It was down a mere 0.4 percent in the first quarter of this year, after having averaged a 4.5 percent decline for each of the previous 20 quarters, says Lawrence Waldman.

Waldman, however, says the industry appears poised to end its long slide, with the recovery to be led by a strong turnaround in housing construction.