By CHRISTOPHER RUGABER
AP Economics Writer

WASHINGTON (AP) — Financial markets are flashing some big warning signs of an approaching recession, and the global economy is weakening as the U.S.-China trade war intensifies.

All of this is heightening fears about the U.S. economy and about whether its 10-year expansion, the longest on record, is nearing an end.

On Wednesday, a rare realignment in interest rates intensified those worries: The yield on the benchmark 10-year U.S. Treasury note briefly fell below the yield on the 2-year Treasury for the first time since 2007.

Normally, investors earn higher interest on longer-term bonds than on short-term ones. Put another way, the government will usually pay more to investors who are willing to lend their money for longer periods.

So when that situation reverses itself — when longer-term Treasurys pay less than shorter-term ones — economists call it an “inverted yield curve .” An inverted curve suggests that bond investors expect growth to slow so much that the Federal Reserve will soon feel compelled to slash short-term rates to try to support the economy.

In short, it’s a sign of economic pessimism. Inverted curves are, in fact, remarkably reliable harbingers of recessions: They have occurred before each of the past five downturns.

The inversion sent stocks plunging Wednesday; the Dow Jones tumbled by 800 points, or by 3%. Still, an inversion says little about the timing of a forthcoming recession. On average, inversions occur roughly two years before a downturn.
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SO ARE WE NEARING A RECESSION?

Many economists worry that the odds of a recession odds are increasing. Julia Coronado, chief economist at MacroPolicy Perspectives, sees a 40% probability of a downturn within the next 12 months, up from 30% last month.

Those concerns stem in part from the U.S.-China trade war, which appears to have discouraged many businesses from expanding and investing in new buildings and equipment. It is also harming Germany’s export-led economy, which shrank in the second quarter. A chaotic British exit from the European Union looms this fall. Japan and South Korea are also engaged in a trade fight.

And the Trump administration has essentially acknowledged that its planned 10% tariffs on $300 billion of mostly consumer goods from China would hurt U.S. shoppers. On Tuesday, Trump said he would postpone, from Sept. 1 to Dec. 15, the tax on more than half those imports to avoid raising prices for holiday shoppers.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic.

“I wouldn’t forecast a recession just on the yield curve,” said Eric Winograd, senior economist at AllianceBernstein. “I would want to see other signals that point to that, but we’re not seeing them right now.”
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WHAT IS A RECESSION?

One rule of thumb is that a recession occurs when gross domestic product, the broadest measure of U.S. growth, contracts for two straight quarters.

But that’s not the official definition. The National Bureau of Economic Research, a private organization of economists that formally defines recessions, say they occur when there is: “a significant decline in economic activity” lasting for more than “a few months,” as seen in a range of economic data, including GDP, incomes and jobs.

The bureau makes its determination retroactively. So the economy can actually be in recession for some time before it is officially declared so. The bureau, for example, declared in November 2008 that the Great Recession had begun 11 months earlier.
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WHAT DO ECONOMISTS WATCH FOR SIGNS OF A RECESSION?

The most commonly cited indicator of a weakening economy is weekly first-time applications for unemployment benefits. People can receive benefits if they’ve been laid off or have lost a job through no fault of their own. So a rising in the pace of application submissions can suggest that companies are cutting jobs.

Last week, there were 209,000 first-time applications submitted, a low number.

The Institute for Supply Management’s survey of manufacturers is another important gauge. Lately, it has shown that factory activity has been slowing. Manufacturing makes up a relatively small part of the economy but is more quickly affected by downturns than are services. That’s because people cut back on buying cars and other large things when they feel economically squeezed.
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HOW SEVERE MIGHT A RECESSION BE?

If there is one anytime soon, it’s hard to tell how long or deep it will be. But many economists think it might be relatively mild. That’s because American households are in stronger financial shape than before the Great Recession. Mortgages and household debts, as a percentage of overall incomes, are lower. And ultra-low interest rates make it easier for consumers to stay current on their debts.
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WHAT SHOULD I DO WITH MY FINANCES IF A RECESSION IS COMING?

Since it’s hard to know when or if a recession will occur, most experts advise against making big changes, such as rashly selling stock holdings or postponing big purchases that you can otherwise afford.

Generally, it makes sense to do what most personal finance experts typically recommend: Pay off credit card and other high-interest debt and make sure you have a cushion of savings.

The drawback of such advice, though, is that if it were widely adopted, it could make a recession more likely, since it would meant that millions of consumers would be collectively pulling back on spending. Companies’ reluctance to invest amid the uncertainty of the trade war, has already slowed growth.

“We could end up talking ourselves into a recession,” said Jay Bryson, global economist for Wells Fargo.

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In June 2009, work had recently halted at Park Avenue West, leaving a sizable excavated hole in downtown Portland. Stacy and Witbeck was about to start the first phase of the Portland Streetcar Loop Project. Mayor Sam Adams was floating Lents Park as a site for a baseball stadium to host the Triple-A Portland Beavers. The Portland Development Commission was proposing the ambitious Oregon Sustainability Center near Portland State University.

Public-sector work was about the only thing going. The economy was in a shambles. Oregon had a 12.2 percent unemployment rate, the second-highest in the nation (most recently, in April, the rate stood at 4.3 percent).

Contractors were desperate for work – a simple $2.5 million armory remodel that month attracted a dozen bidders. Local government agencies were pleasantly surprised by low bids coming in below their estimates.

This month marks 10 years of economic expansion, soon to become the longest such period in American history. In that time, Portland has gained more than 70,000 residents, with robust 12 percent population growth, and many more in the surrounding metro area. Thousands of apartments have been built, and millions of square feet of new office space delivered to the market.

So, what now?

Predicting the timing of an economic downturn or recession is notoriously difficult. Something like the local real estate market is affected by both macroeconomic conditions such as growth and interest rates, and local phenomena like Portland’s inclusionary housing and rent-control policies.

Broadly, the local economy is in good shape, said Tyler Bump, a project director for ECONorthwest.

“Both population and job growth are still on the positive and still growing, but less so than in previous years,” he said. “So that baseline is sort of filtering through the real estate market. Things are happening, just at slower rates than what they have before.”

Eventually, lower population growth rates will impact multifamily development, while slower employment growth may take some air out of the office market, Bump said.

Nationally, economists are watching for an inversion in the yield curve, a measure of Treasury bonds that has a strong record of predicting recessions. On Wednesday, 51 basis points separated 10-year and 30-year Treasury bonds.

Office construction remains robust despite more than 1 million square feet being delivered in 2018.

“Yes, we’ve built a lot for Portland standards, but at the same time, it feels very healthy,” said Tim Harrison, research manager at Jones Lang LaSalle‘s Portland office.

He added, “The market sentiment we’re seeing is more upbeat than we were seeing at this time last year.”

Office sales have been brisk this year, with Montgomery Park selling for $255 million, Field Office for $118 million and Park Square for $96.5 million. Total sales volume through May reached $884 million, far greater than in any similar period since the Great Recession, according to JLL.

The Central Eastside Industrial District is a bright spot. What began as small-scale redevelopments of warehouses into office space has evolved into major new ground-up Class-A office projects such as 5 MLK, District Office and 7 SE Stark.

“The job growth in the Central Eastside is still booming,” Bump said.

Industrial and logistics space is also in high demand, as Amazon and other e-commerce distributors snap up facilities close to population centers.

Multifamily development in Portland has slowed dramatically, a drop-off that developers blame on inclusionary housing, which requires developers of projects of 20 units or more to provide affordable housing units or pay into a fund. Developers have responded in large part by proposing neighborhood-scale projects of fewer than 20 units, or full-block buildings with more than 100 units, exemplified by a trio of projects from Mill Creek Residential Trust.

Apartment brokers are also noticing an ominous drop in multifamily sales.

Noel Johnson, a principal at Cairn Pacific, is at work on a concept for three- and four-story for-sale row houses and a series of 18-unit apartment buildings in Northwest Portland, all built with cross-laminated timber and aimed at creating a walkable, urban neighborhood.

He said there’s little to be gained by reading economic tea leaves.

“Everyone’s just guessing,” he said.

Johnson said he learned long ago to focus on his own projects.

“I’m just focused on a micro level, on a neighborhood level, trying to create a product that is needed, that resonates,” he said. “If your product is really truly answering what people want, or what people need, then that project is successful regardless of economic winds.”

The Waterfront Vancouver is one of the most notable large-scale developments to emerge since the recession. Barry Cain, president of Gramor Development, and his business partners closed on the retired paper mill property on the Columbia River in February 2008, a few months before Lehman Brothers’ collapse marked a national economic reckoning.

“It’s always surprising when the market goes down like that,” Cain said. “It doesn’t feel like it has anything to do with what you’re doing.”

The Waterfront Vancouver should do well in any economy, he added.

“I suppose we’re a little more conservative in how we go forward,” he said. “I think we’re in a good place. There’ll probably be a bit of a downturn at some point, but every part in the country doesn’t feel a downturn the same way. This should be a good place to be regardless.”

The decade-long economic boom has underwritten countless individual success stories. Ten years ago, Colleen Murphy, then an interior design principal with Myhre Group Architects, was featured in a 91��Ƶ article about looking for projects in a lean economy. Now, she’s the CEO of Fluent Design, which she founded in 2012. Murphy has four employees and is looking to hire more.

“We’ve got a lot of potential projects out there,” she said. “We definitely feel like we can handle one if not two more employees, and that’ll free me up to chase more work.”

The post Great Recession remains in rearview mirror appeared first on Daily Journal of Commerce.

Going through the wringer tends to remove the wrinkles.

“Through the ’90s, we were really indoctrinated into the belief that bigger is always better,” said Jeff Myhre, the founder and president of Myhre Group Architects. “Our company at that time (prior to creation of Myhre Group), through the ’90s, would take on any project, any client, for any reason. We gauged our success by head count.”

Myhre carried that philosophy over to Myhre Group, which was hit hard by the Great Recession. From 2007 to 2010, the company reduced its staff from 135 people to 25. Equity dried up and so did Myhre Group’s pipeline of projects.

Now, as the economy re-emerges, architecture firms including Myhre Group are growing again. But this time it’s tempered with a focus on project selection, and a new appreciation for payroll.

“My partners and I have concluded that bigger may be better for some, but it’s not better for us,” Myhre said. “The other thing that comes with growth at the haphazard growth rate is quality of staff diminishes … There’s a very high turnover rate, which is not good for clients or quality control. It creates problems with morale. It’s just not a situation that you want to find yourself in if you care about being an enduring great company, which we do.”

This week, Myhre Group moved into an 8,200-square-foot office space on the fifth floor of the 620 Building in downtown Portland. The firm now has 40 employees, but its new space can accommodate only 13 more.

Instead of focusing on the amount of work, Myhre Group is zeroing in on the type of project – both in terms of diversity and chances of ground being broken. If the company had been more selective in how it chose clients in 2005 and 2006, Myhre said, it probably would not have had to lay off so many employees in 2007 and 2008.

Even large firms are refining their practices post-recession. ZGF Architects‘ Portland office has nearly 200 employees, but Bob Packard, the company’s managing partner, said the staff had to be reduced by 15 percent during the downturn. ZGF is exercising shrewdness as it proceeds.

“There’s an attitude of being very careful about the number of people you have, and what their skill sets are, and trying to be very responsible to the firm as well as to the new employee – that it’s not just for a week or a month-long effort that we’re getting them for,” Packard said. “When we hire somebody, we like to know that it’s for a little bit longer.”

Packard said the general word on the street is cautious optimism. ZGF started hiring again six months ago, and its billings are tracking closely with the national trend.

According to the American Institute of Architects, the national Architectural Billings Index scored 51.9 in March. It reveals construction activity nine to 12 months down the road; any score above 50 indicates growth. March’s score was down a few points from February’s, but in general the index of late has improved steadily.

Hennebery Eddy Architects is ramping up too. In a few weeks, it will temporarily relocate to a new space in the Pittock Block, while its offices are completely renovated and expanded.

Hennebery Eddy also reduced its workforce during the recession. Its new space will accommodate 25 percent growth, but Michelle Vo, a principal at the firm, said that isn’t planned in the immediate future.

“This is something we’ve been planning for some time, and we have confidence in where (the economy) is headed,” she said. “It doesn’t mean we’re bullish and taking a gamble. We just have confidence. I would say our growth has been steady over the past few years, and I think our approach – the balance of projects that we have, and being a client-focused firm – is all good for us.”

While the architectural ship appears to be righting, Packard said he still notices the empty seats previously occupied by young people who jumped overboard when it was sinking. He worries how their departure will impact the field when older generations retire.

Shawn-Patrick O’Donahue was one of those casualties. In 2009, he was one of more than 100 employees who lost their jobs when Sienna Architecture closed its doors. O’Donahue joined some colleagues who had been laid off (some from Myhre Group) to start their own firm. It fizzled after two years.

“We all had high hopes and high expectations, but we also knew in general that we had the deck stacked against us,” he said.

O’Donahue didn’t leave the field, but he left Portland. A headhunter found him and placed him in Chicago, where he’s now a senior designer and vice president of hospitality and design for VOA Associates.

VOA is a massive, worldwide firm, but it too is putting a greater focus on project selection. O’Donahue said the firm assesses how its reputation and brand will be affected by a relationship with a potential new client before it moves forward.

“We’ve actually passed on work when we didn’t feel like it served our goals, or those of our clients,” he said. “In the past, as it was really heating up, it was kind of this attitude where we would take anything that came across the plate and deal with the consequences later.”

For Myhre, that understanding came with a personal metamorphosis of sorts. He would have a lot to say to himself in 2007 – namely, don’t be afraid to pass on risky business.

“You have to ditch the fear,” he said. “That’s the first thing. If you’re going to let fear drive your decisions, you will never be in command or control of your life … Profits follow passion. If you’re passionate about it, you’re going to be good at it. And if you’re good at it, then people seek you out and pay you.”

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(Editor’s note: This piece originally ran in the June 2, 2011, issue of the Briefly Legal PDX e-newsletter)

As the recession left its impressions on businesses throughout the region, it forced many of those businesses to rethink their approach to their markets and business development activities with a discipline forced upon them by unprecedented financial pressures. Certainly, the legal profession was no exception. From those circumstances, several key lessons emerged that should serve us well as the recovery continues and beyond.

The legal profession – perhaps like any profession – is largely built on trust-laden relationships, whether relationships with clients, prospects, referral sources, or key business partners. The legal profession confronted a stark reality it had previously never experienced.

Firm management could no longer assume that there would be an ever-increasing demand for legal services to fuel firm growth and profitability. In some practices, demand fell off; in a few other practices, it fell off dramatically. Focusing on expenses was important, but had inherent limitations. Draconian measures with respect to personnel often cut into the muscle of an organization, particularly one built on relationships. Success depended on increasing market share, often in markets where there was a diminished demand for services.

While the recession dealt a financial blow to the region’s businesses, it also delivered a gift to those businesses built on relationships – the gift of time. Busy professionals often lament that they lack the time to invest in building and deepening relationships with those individuals key to their continued success. For perhaps the first time in their legal careers, some individuals found themselves with time they could devote to relationship-building. Those that took advantage of that gift will most assuredly be well-served, not just during this period of economic recovery, but well into the future.

Mark Long is a managing partner at Schwabe, Williamson & Wyatt

The post A matter of perspective: Great Recession a gift or a curse? appeared first on Daily Journal of Commerce.

In one of Aesop’s fables, a wise ant once said to a grasshopper, “It is thrifty to prepare today for the wants of tomorrow.”

That could very well be the moral of the story for a report issued last week to the governor and the state Legislature, by the State Debt Policy Advisory Commission – a team led by Oregon State Treasurer Ted Wheeler tasked with assessing Oregon’s financial health and debt capacity.

Citing revenue shortfalls, the commission recommended that “no net increase in general fund-backed debt be authorized” for the remainder of the biennium. That could spell trouble for groups seeking state-funded capital financing.

“Right now, it doesn’t really matter what the project is,” said Sen. Richard Devlin, D-Tualatin, a member of the debt policy committee. “I think what the debt policy committee is saying is: ‘Do not issue any additional debt in either (general obligation) bonds or lottery bonds unless you absolutely have to.’ ”

In part because of a weakening global economic climate, the Oregon Office of Economic Analysis reported in December that general fund revenues for the 2011-2013 biennium are expected to decrease $277 million from 2011 projections to $13.7 billion.

Because of $167 million in new general fund debt – authorized by the Legislature in the 2011 session – the advisory commission reported that the state will slightly exceed its historical target of general fund-backed debt through the remainder of the biennium.

The state attempts to keep debt service as a percentage of general fund revenue to a maximum of 5 percent in order to maintain its favorable credit ratings. At the end of the current biennium, that ratio will be 5.02 percent.

The state’s lending capacity is expected to return by the 2013-2015 biennium, with the ability to lend $640 million in general fund-backed obligations per year, as well as $619 million in lottery bonds over the course of the next two bienniums – assuming no additional spending takes place in 2012.

The recommended hold on spending, however, is not likely to affect requests for direct revenue bonds, which are typically paid for by a dedicated revenue stream associated with a project, such as rent or tuition.

Di Saunders, spokeswoman for the Oregon University System, said it plans to seek at least $120 million in Article XI-F bonds for five university construction projects. Those include: Oregon State University’s $43.6 million Student Experience Center, a $30 million residence hall at OSU, a $9.58 million renovation of the east wing of OSU’s Memorial Union and the $65 million Oregon Sustainability Center.

Even though XI-F bonds are technically general obligation bonds, they are not paid for with money from general fund coffers, Saunders said.

“We are still in the tail of this recession, but we are optimistic that we can move the few projects that we do have on deck forward and so we’ll be working very closely with (legislators) to continue to answer their questions and remind them about the distinction between the bonds that we’re seeking and the ones everyone is asking for kind of a hold on,” Saunders said.

That doesn’t mean that funding is a sure thing by any means.

Several of the requests are continuations of discussions that the Legislature deferred in July. And the viability of private-sector leasing opportunities at the Oregon Sustainability was questioned in September.

While Devlin said the commission’s recommendations were not aimed at XI-F bonds, he did say all requests would need to be considered carefully.

“We have not suggested any restriction on those (XI-F bonds), although we would still believe, as we have done in the past, that we would be reasonably prudent in the use of those,” Devlin said.

The state does have the capacity to cover approximately $223 million in lottery bonds, because it restructured some of its existing debt in 2011. The Legislature authorized spending for an equal amount of lottery bonds during the last session. Devlin said projects outside of that spending scope – unless they are critically important – have little chance of moving forward.

But competing interests for money are lining up, and one of the projects vying for money is a new veterans home in Lebanon.

“We think the vets home will begin construction this fall,” Linn County Commissioner Roger Nyquist said. “What’s not clear is how the Legislature deals with the inequality of requiring Linn County residents to make a $10.5 million payment for the federal match and then, down in Roseburg, the Legislature decided (it) would take care of that.”

In November 2010, Linn County voters approved a 10-year property tax levy at 19 cents per $1,000 of assessed value to raise money for a federal match program. The state awarded Linn County a contract to construct the veterans home shortly thereafter, Nyquist said.

Then, fewer than 30 days after Linn County made a $10.5 million payment to the state, Nyquist said, legislators decided to cover the entire $10.5 million for another veterans home in Roseburg.

“So what we’ve said is, ‘You’re going to do it for Roseburg; you need to do it for us,’ and so if there’s a lottery bonding package we’d like to be included in it,” Nyquist said.

But Devlin said it is doubtful the Legislature will issue that money to anyone – this year, at least.

“Prior to our most recent couple of debt policy advisory committees, I was saying the chances (that projects will get funding) were slim,” Devlin said. “Now I’m saying the chances are – and this is just me; it’s not the Legislature, nor is it the presiding officers of any of the chambers – I give it between zero and 1 percent.”

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Oregon’s construction industry added 900 jobs in November, continuing a year-long period of tepid growth.

The Oregon Employment Department reported today that construction employment increased 1 percent to 70,300 jobs last month – a return to September levels – while total non-farm payroll employment fell 1.6 percent to 1.6 million jobs.

While non-farm employment was down in November, so was Oregon’s unemployment rate, which dropped 0.4 points to 9.1 percent.

“It’s a good sign that the losses have largely stopped in the construction industry,” said State Employment Economist Nick Beleiciks. “On the other hand, it’s a bad sign because we haven’t seen growth like we have in other industries.”

Joining the construction industry in November in employment gains was the educational and health services industry, which was up 2,300 jobs, and trade, transportation and utilities – up 1,900. November saw losses in leisure and hospitality – down 3,000; manufacturing – down 2,300; financial activities – down 1,100; and government – down 900.

After dropping from a high of 105,100 jobs in July 2007 – just before the economic recession – construction employment decreased approximately 36 percent to a low of 66,400 in September 2010. The industry has remained relatively flat this year between 68,000 and 70,000 jobs.

While he said he didn’t see those levels being the new normal, Beleiciks said Oregon should get used to them for the foreseeable future.

“We do expect growth,” he said. “There will be some recovery, but it may take a really long time to get back to those housing bubble levels. In fact, that may take over a decade.”

Beleiciks pointed to the economic collapse in the early 1980s in which 54 percent of the jobs in the construction industry were lost. That fallout hit bottom 4 years later in 1983, but the recovery took more than 10 years to return.

“The nature of the economy is it’s going to grow and so eventually we should get back,” he said. “Construction is a very place-based industry, so as long as people keep moving to Oregon we’re going to see growth in that industry.”

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President Barack Obama on Thursday night asked Congress to quickly approve his $477 billion American Jobs Act proposal, which includes $105 billion for infrastructure and construction spending.

Initial reaction from built industry professionals – both locally and nationally – is that any increase in federal spending on infrastructure and other construction projects is sorely needed and much appreciated. But as with Obama’s $787 billion American Recovery and Reinvestment Act in 2009, industry professionals say they think any positive effects will most likely be short lived.

“Any effort is appreciated as we can all agree that we need more jobs,” said John Killin, president of the Oregon chapter of the Associated Builders and Contractors. “But as an organization we bought into the stimulus package, which this looks an awful lot like. As soon as the stimulus money dried up, our unemployment rate in Oregon rose again.”

A large portion of Obama’s plan focuses on the extension of unemployment benefits and tax breaks for small businesses. The rest focuses on short-term spending to modernize schools, fund federal infrastructure projects, and rehabilitate and repurpose vacant space in neighborhoods across the country.

While Killin likes the intent of the effort – getting people back to work – he doesn’t agree that the package offers a real solution to that problem.

“These tweaks and holidays don’t work,” he said. “We need to roll back these barriers to doing business and remove the regulations that are hurting the people that create jobs.”

U.S. Rep. Earl Blumenauer, D-Ore., a senior member of the House Budget and Ways and Means committees, voiced similar concerns in a statement he released following the president’s speech. But Blumenauer said he wants to keep an open mind until he is able to examine the plan in greater detail.

“I don’t believe that tax cuts will create as many jobs as investing in infrastructure, but I look forward to reading the president’s plan and to (learning) more details,” Blumenauer said in his statement. “We must guard against people just taking the easy political step of cutting taxes and not the heavy lifting of tax reform and funding our failing infrastructure.”

Others had fewer reservations, if any.

John Mohlis, executive secretary-treasurer with the Columbia Pacific Building Trades Council, said he considers any proposal that pays for infrastructure and puts people back to work to be a good thing in the current economy.

Tom Chamberlain, president of Oregon AFL-CIO, agreed. He believes the plan could really benefit Oregon.

“I saw a lot of good stuff, especially the transportation stuff,” Chamberlain said. “Hopefully there’s some money in there for the (Columbia River Crossing) project. That would have a direct positive impact not only on Oregon construction workers but our entire unemployment rate and the economy in general.”

The American Institute of Architects also voiced strong support for the president’s plan, especially the money dedicated to construction spending. The organization estimates that every $1 billion invested in nonresidential design and construction results in 28,500 full-time jobs. By that calculation, Obama’s plan could result in nearly 3 million jobs.

But while the AIA supports the spending in the plan, the organization is also calling for at least one more addition – the continuation of the Build America Bonds program.

“In the two short years that the program was authorized, state and local governments used Build America Bonds to finance roughly $180 billion (of) new construction projects, preserving tens of thousands of jobs,” AIA President Clark Manus said. “We estimate that at least $45 billion of that amount was used in the construction sector to finance schools, offices, hospitals and other building projects that improve communities.”

The U.S. Green Building Council took a similar stance. Rick Fedrizzi, president and CEO of the U.S. Green Building Council, offered the organization’s full support of the proposal and its passage. But he also mentioned several energy-efficient tax incentives that could be included to create more jobs.

“Specifically in commercial building, we know fixing the tax incentive for energy-efficient commercial buildings, Section 179D, could create 77,000 additional jobs in energy efficiency,” he said in a statement about the plan. “I hope Congress will strongly consider this commonsense tax fix.”

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More contractors in Oregon plan to lay off workers in 2011, but overall the economic picture for the embattled industry seems to be improving, according .

Of the Oregon companies that responded to a questionnaire, 29 percent plan to lay off workers, 18 percent plan to add workers and 53 percent plan no changes to their workforce in 2011.

That’s not all bad news, however, because the expanding companies in that group plan to add an average of 19 employees each, whereas the shrinking companies plan to lay off an average of six employees each.

The numbers are also an improvement over 2010, when 16 percent of the respondents added an average of three employees and 66 percent laid off an average of 18 employees each in the state.

The national numbers anticipated for 2011 also seem to indicate an improving economy. Of national respondents, 27 percent said they plan to add an average of 23 employees, while 20 percent said they plan to lay off an average of 16 employees.

Still, profit margins remain small. About 68 percent of the Oregon respondents reported adjusting bids for smaller profits in 2010, and 21 percent said they expected those profits to shrink even more in 2011.

In 2010, 11 percent reported adjusting bids for greater profits and 13 percent said profits were the same, and in 2011, 16 percent said they expected to increase profits, and 58 percent said they expected profits to remain steady.

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In 2007, when business was booming, Jesse Rodriguez, president of R&R General Contractors, remembers what could be called a contract bidder’s market. Companies asked for – and got – 15 percent, 20 percent or even 30 percent more for a project than an engineer’s estimate, he said.

Now, as the Great Recession lingers, those margins don’t exist. A bid has to come in below the engineer’s estimate to have a chance. Even then, firms are outbid about half the time, Rodriguez said.

“It’s tough out there. It just keeps getting cheaper and cheaper,” Rodriguez said. “I don’t know how some of these guys pull it off, coming in so low and still completing a job. But they do.”

Many local companies reluctantly agree that 2011 looks like another flat year for Oregon’s construction industry. A lot of smaller firms have already folded, and more will probably follow this year, Rodriguez said.

“2011 is going to be tough,” Rodriguez said. “You’ll see more contractors go out of business because the backlog is going to be gone. It’s a sign of the bad economy, and I don’t think we’ll see a jump until 2012.”

These days, the phrase “cautiously optimistic” seems to frequently roll off the tongue of John Killin, executive director of Associated Builders and Contractors of Oregon. But he declined to go further when talking about the present construction economy.

“2010 was pretty awful, but many I talked to still had a better 2010 than 2001,” Killin said. “They’ve gotten leaner, they’re more efficient and they’ve got fewer competitors. For those reasons I think 2011 is still somewhat hopeful.”

Hope may be one of the few things keeping people in the industry excited these days. Any news of a small market uptick is spreading rapidly.

There might finally be some growth in home building in 2011, Killin said.

If voters were to pass a $548 million bond measure to improve or rebuild some of Portland Public Schools’ facilities, it would be great news for the industry, he said.

And at least Intel will add to the workforce with its $6 billion to $8 billion project to add a new research fabrication plant in Hillsboro, he added.

Some of the larger companies even seem to be performing fairly well despite the slow economy.

For Hoffman Construction, the prime contractor for the Intel project, 2011 looks relatively good, said Bart Eberwein, vice president for business development and a spokesman for the company.

Intel’s growing presence could spread some of the wealth, as well, as suppliers for the high-tech sector move in to the area to work with the company – leading to new projects for Hoffman and other contractors, he said.

Hoffman also might capitalize on some prison construction projects in the coming year, depending on decisions made in the state Legislature, Eberwein said.

“In public safety, there’s always a lot of prison work out there and we’re always paying attention to that,” he said.

But companies like Hoffman could be called exceptions to the bad economy rule. Many others are simply holding on and snatching up work where they can find it.

Advanced American Construction of Portland is another company expecting 2011 to be a relatively flat year. But it has been somewhat insulated from the worst of the downturn because of its focus on projects from public agencies, said Dee Burch, the company president.

“2011 is looking OK,” Burch said, pausing briefly. “There’s not a lot of new work, but there’s enough.”

Work on the U.S. Army Corps of Engineers project to remove and replace gates on the John Day Dam and other projects in the navigation lock system have helped Advanced American Construction over the past year.

And in 2011 the company hopes to get work on the Sellwood Bridge project through a team bid it’s working on with other companies, Burch said.

“That’s a really good project for us if we’re successful,” Burch said.

Rodriguez, meanwhile, says he has enough work to bring his five office employees and 12 field employees through 2011; however, he does not expect much business growth.

“Those are the guys I need to keep,” Rodriguez said. “I have enough work to keep them busy, and I think we’ll be fine through 2011. If anything positive has come out of this, then I think it’s that some contractors that really had no business being in this industry are starting to go.”

He added that he expects business to perk up significantly when the $1.47 billion Portland-to-Milwaukie light-rail project starts late this year or in early 2012.

“We just have to hang on until then, but we’re a subcontractor on that,” Rodriguez said. “If it gets too slow before then, well, I guess I’m just going to have to get really good at playing solitaire.”

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Engineers look forward to a better 2011

The American Institute of Architects’ Architecture Billings Index – a leading indicator of the industry’s economic health – in November 2010 reached its highest point since late 2007. But Oregon architects nevertheless expect 2011 to be another tough year.

With the state facing a budget crunch, school districts encountering similar circumstances and other public money pools drying up, architects don’t expect this year to yield the flood of public work that sustained many firms through 2010. Instead, firms may find themselves in fierce competition to design renovations, tenant improvements and other small projects that are beginning to reappear in the private sector, according to Tim Eddy, principal at Hennebery Eddy Architects.

Oregon faces a $3.5 billion budget shortfall over the next two years, making capital project funding unlikely. Portland Public Schools in May will go to voters with a $548 million construction bond; however, in November 2010, only one of five proposed school-bond measures around the state was approved by voters.

“Based on the state budget and all public budgets, we expect the public side of things to slow down in 2011,” Eddy said. “But private institutions are starting to think about smaller projects. We expect things to continue to pick up, but it’s still very slow.”

Even universities, which in 2010 solicited designs for many new residence halls, plan to restrict their spending in 2011, according to Cameron Hyde, a principal with Soderstrom Architects.

“Our public university clients don’t seem to have any money,” Hyde said. “The Legislature hasn’t figured out how to fund education and can barely keep services in place. The first thing to go could be capital improvement projects, unless they start printing money.”

The ABI, however, recently hit 52 – and any number over 50 indicates an increase in billings. A year earlier, it was at 46.1.

LRS Architects rehired five people in 2010, principal Steve Mileham said. He attributed the company’s success in 2010 to diversity of project types. Also, LRS three years ago began operating out of its Shanghai office.

“We’re doing a 1.2-million-square-foot project in Shanghai that will be a convention center and office,” Mileham said. “Having that office abroad has been helpful. It’s gotten us large projects that haven’t been available here.”

In Oregon, private work, though small in scale, was steady throughout 2010, Eddy said. His firm landed several renovation projects, including a revamp of the Spalding Building in downtown Portland and a renovation of a West End retail space for a new bike shop. Similarly, DECA Inc. also had steady work in 2010 performing storefront renovations and improvements at private clubs, according to firm principal Sallee Humphrey.

“There have been projects, but they’ve been smaller,” Humphrey said. “I think firms who have downsized are at the point where there are enough small projects coming in to sustain the staff they have. When bigger projects let loose, then hopefully people will start to hire back.”

Though more small projects may be available, competition is still fierce, Hyde said. He has seen other architecture firms quoting projects at-cost or less simply to land work. And even then, projects may not move forward for years, Hyde said.

“These projects are taking three or more years just to break ground,” Hyde said. “It’s almost as much work getting the job as doing the job. I hope it’s not the new way of doing business. But until someone shows us otherwise, this is how it is.”

Humphrey said her firm’s clients still are having trouble securing construction loans for projects. Lending practices, she said, will determine whether Oregon’s architecture industry will continue to recover.

“My hope is that 2011 will be better,” Humphrey said. “It has a lot to do with banks loosening up the money. People need to feel confident about investing again, and I don’t know when that will be.”

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