Construction Start-ups the Latest Indicator of an Industry Recovery

Construction start-ups were a hot item in 2011, further evidence of the sectors recovering roots.

The news cycles have been been abound with positive developments in construction the past couple weeks (and we’ll have a new issue on construction out on Monday), but the Wall Street Journal has just reported on perhaps the most encouraging detail of all – of the many sectors of the economy, construction is one of the most active for start-ups.

“One usually thinks of start-ups as cutting-edge,” wrote Sarah E. Needleman for the paper. “But it turns out the hottest growth area for new businesses isn’t so sexy: It’s construction.”

The change, Needleman writes, is the result of construction employees who lost their jobs in the downturn starting their own proprietorships to meet the new demands in housing starts and especially home remodeling jobs, which have risen to all-time highs as homeowners improve their existing properties for a future sale when home prices recover.

Stuart G. Hoffman, chief economist for the PNC Financial Services Group in Pittsburgh, said the changing tides in construction have meant different outlooks for the industry.

“Improvements in home building last year meant that new construction firms were not swimming against as strong a current as in the previous four years,” Hoffman said.

And the data suggests that Hoffman is on to something. Construction start-ups accounted for 24 percent of all U.S. entrepreneurial activity in 2011, according to Ewing Marion Kauffman Foundation estimates cited by Needleman, and that was while overal business creation dropped by 6 percent. Overall, the Kauffman report found that construction entrepreneurial activity was up from 1.6 percent in 2010 to 1.7 percent in 2011.

In addition, construction employment rose in December on a year-over-year basis to 5.5 million jobs, according to the Bureau of Labor Statistics, and that was due in no small part to increased spending on additions and alterations to single-family homes, which rose from $112 billion in 2009 to $116 billion in 2011, according to data from the National Association of Realtors.

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