Wednesday, April 8, 2009

Is the Economy Turning Around?

Anecdotal chatter among PSMJ consultants and on the LinkedIn networking site among A/E industry professionals leads me to think the answer to this is yes, even though the hard data that comes out from the American Institute of Architects (the Architectural Billings Index) and FMI says we are either at the bottom or haven't quite reached it yet.

Indeed, while the Architectural Billings Index has improved from its all-time low, it remains sluggish as of the March numbers released last month (the new numbers should be out in the next week or so). And the most recent Construction Outlook, a quarterly construction market forecast developed by FMI's Research Services Group, forecasts nonresidential construction will plummet and begin at least three years of contraction. The bottom, in terms of both dollar volume and percent decline, will not be until 2010. Residential construction is not expected to recover until 2011.

Going further, the FMI report indicates that project delays are four times the normal rate and are currently at 20 percent. Also, project cancellations are five times the normal rate and are currently at 10 percent.

Where does the optimism come from then? Well, the stock market seems to have reached its floor and has risen slightly from those numbers, although it is still well below where it was six months ago. And the American Recovery and Reinvestment Act (the official name for the stimulus bill signed into law in February) seems to have at least boosted flagging spirits among AEC firm leaders. Proposal activity is ramping up (see PSMJ's Q1 2009 A/E/C Market Forecast) and projects seem to be moving forward.

While PSMJ consultants don't see things really moving forward until next year, you cannot afford to wait until then to hire staff that you'll need to complete those projects. It's true that your overhead will take a hit in the meantime, but if you wait, all those talented employees who are either underutilized or unemployed will be snapped up by the competition.

We waited too long as an industry to reduce our overhead when times got tough, we cannot afford to make the same mistake again when times get better.


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