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My economic, industry predictions for 2012

I’m not going to sit here and pretend to have a clue what that or those things might be that will help The Great Recession turn the corner and eventually stabilize not just the economy in general, but our middle-management mechanical contracting employment section in particular.

Two strangers sitting next to each other at a bar struck up a random conversation and eventually the tone rolled around to the polite topic of jobs and employment.

The first gentleman asked his temporary drinking buddy, "Where do you work?"

"Oh, I have a PhD in Philosophy from Cornell where I did my thesis on contemporary 20th century French existentialist philosophers.

"I didn't ask you what degrees you have, I asked you where you work, so, tell me, what cab company do you drive for?"

His increasingly inebriated companion now slightly miffed because he drove an airport shuttle bus and not a cab replying back, "Well, tell me, friend, what cab company do you drive for?"

"I don't drive a cab, I'm a mechanical contracting project manager and senior-level estimator with over 30 years experience and..."

Before he could finish, his fish-eyed buddy responded, "Oh, a big whig heating and air project manager … I'm impressed, so tell me, friend, at which local Wal-Mart are you a greeter at?"

The above is my way of introducing my first prediction about the current state and near-term future of our industry, which might not be a shock to some of you, but allow me to state something that a good percentage of us are still seemingly in denial about. With very little actual future work now being in the pipeline, from owners’ requests for proposals from A/E firms to plans being created for new buildings, with said work being put out on the street for actual bid and said process usually taking a minimum of 18 months to as long as three or more years, many project managers/estimators who run the gamut in years of experience from one to thirty or more are simply being squeezed out of the profession because there’s little new work right now.

When another of our brethren leave us because hard-nosed reality demands they take a job, any job of any kind just to be able to pay their bills, chances are we've lost them for good since by the time the pipeline starts flowing again it’ll be increasingly harder for them to switch careers back once more.

Yes, this really sucks, but these much larger forces at work within the bowels of the economy where no one can really make all that much sense of it all will churn and churn until something truly remarkable happens. I'm not going to sit here and pretend to have a clue what that or those things might be that will help The Great Recession turn the corner and eventually stabilize not just the economy in general, but our middle-management mechanical contracting employment section in particular.

Until then, to refrain a couple of my old familiar themes, try to keep your professional networks of friends and colleagues intact and definitely try to keep all of your professional and trade licenses current, you just never know when you might need them again. Say what you want, being a project manager or estimator until times truly go down the tubes will always pay more than driving a cab or working at Wal-Mart.

My second prediction is that the market for new residential construction will not just be flat but will continue to actually keep contracting as the backlog of existing ready-made brand new slums-in-waiting that were built just before "The Bubble" burst. The houses continue to sit on the shelf aging out as the government and banks still try to hold out false hopes that they’ll be able to sell these over-priced homes. The houses are truly underwater by fantasy appraisals that the banks still want to sell them at despite the fact there are two or three new waves of ready-made foreclosures getting ready to hit the market as the U.S. economy continues to shed its working middle class (you and me, dudes), The working middle class would have been the logical market for restructured reasonably priced homes if our current jobs were actually secure enough to be able take on a mortgage.

And here's the rub: as these new homes (either foreclosures or otherwise brand-new homes built a couple years ago), which have been sitting unsold and unoccupied all this time continue to sit on their over-valued and over-priced real estate, their actual street-price value will continue to steadily drop until the wear and tear of time takes its weathering toll. These so-called "starter homes" will be worth perhaps a third of what they first were, and banks instead of trying to hold on to them for eventual sale will write them all off and begin scraping many of them clean, both off the land and off their balance sheets.

The commercial market for the next year doesn't look quite as bleak, but doesn't look rosy either. The market for new commercial construction both in major additions to existing complexes as well new out-of-the-ground buildings especially in the medical, scientific and specialty genres will actually tick up a bit in certain areas of the country and perhaps tick down a bit in other parts when a lot of the current stimulus money runs out, but overall the commercial market is in much better shape than the residential one, which is basically DOA.

While there are few ancillary plays for residential plumbing and HVAC contractors, those that have an established commercial track record will be able to continue to push LEED means and methods upsells and retrofits, hopefully generating some cash flow that way as well as getting down-and-dirty for the occasional tenant upfit within commercial spaces will hopefully make enough money to pay your half-cut salary.

And lastly, now that China and its economy has somewhat calmed down and they're not buying any scrap metal of any kind that's not nailed down, at least not as much as they once were, commodity prices will remain within a fairly narrow trading range for the first half of the year. It will be the third quarter before volatility in the markets from the upcoming Presidential elections hits once again and market stability won't return until first or second quarter 2013, assuming we all survive end-times — Dec. 21, 2012, that is (grin)!

Kent Craig is a second-generation mechanical contractor with unlimited Master’s licenses in boilers, air conditioning, heating and plumbing. You may contact him via e-mail at: [email protected].

TAGS: Management
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