Not Much to Smile About

July 1, 2002
Early in the year, many economists predicted an end to our country's recession by midyear. But as we step into the third quarter, the business climate remains bleak, with little hope for a turnaround anytime soon. Corporate America's accounting scandals and a weakening dollar continue to cripple the financial markets. Both the Nasdaq composite and S&P 500 index continue to hover around their post-Sept.

Early in the year, many economists predicted an end to our country's recession by midyear. But as we step into the third quarter, the business climate remains bleak, with little hope for a turnaround anytime soon. Corporate America's accounting scandals and a weakening dollar continue to cripple the financial markets. Both the Nasdaq composite and S&P 500 index continue to hover around their post-Sept. 11 levels. Lackluster corporate earnings and a soft economy are holding down stock prices. And consumer confidence is at its lowest level since February. All of these factors combined force building owners to hold back on capital investment, which translates into a flat construction market. A closer look at the latest electrical marketplace figures explains why few of you have reason to smile.

Manufacturing

  • Although electrical manufacturers' shipments rose 1.8% in April from March, the current level of $2.7 billion is 7.1% below the April 2001 level, according to data from the U.S. Commerce Dept.

  • Employment in the electrical equipment and supplies manufacturing sector (i.e. production workers) stood at 245,300 in May, down 11.9% from a year ago, according to the U.S. Labor Dept.'s Bureau of Labor Statistics.

  • April U.S. machine tool consumption totaled an estimated $171.4 million, down 8% from March, according to the Association for Manufacturing Technology and the American Machine Tool Distributors' Association. The year-to-date total of $689 million is down 30.8% compared to the same period in 2001.

Distribution

  • Total 2001 sales for the 250 largest electrical distributors decreased by 8.4% to an estimated $36.9 billion, according to “The Top 250” report recently published by Electrical Wholesaling magazine. However, this decrease seems small when compared to the year-to-year sales declines reported by distributors in the first half of this year.

  • The number of employees in “The Top 250” decreased to 76,781. The average percentage decline among the 194 distributors that supplied employee counts for the study was 3.8%.

Construction

  • Although nonresidential construction contract awards in May were up 6.7% as compared to April, they were down 8.5% from May 2001, according to McGraw-Hill, Inc. The reports are even worse when we take a look at new construction. According to the U.S. Dept. of Commerce, the value of new offices put in place in April was $42.9 billion, down 27.1% from a year ago. The numbers get even worse in the industrial sector — new construction in April was $19.6 billion, down 43.4% from a year ago.

  • The residential market offers one of the few bright spots — construction was at $23 billion in May, up 2.4% from the previous month and up 6.6% from last year, according to McGraw-Hill, Inc. In addition, the U.S. Dept. of Commerce reported that housing starts in April totaled 1.733 million units, up 11.6% from the previous month and up 8% from April 2001. The National Association of Home Builders projects the total number of new housing starts will be up this year by about 2% over last year.

  • According to the U.S. Labor Dept.'s Bureau of Labor Statistics, electrical contractor employment for April stood at 632,100. This is down 0.2% from March and 6.6% from a year ago.

These statistics offer a grim reminder of just how bad business is right now. Although I'd love to say, “Don't worry, good times are just around the corner,” there's not much data available to support that line of thinking. So the way I see it, you don't have much choice. You must continue to carefully manage your expenses, inspire efficiency at all levels of your organization, and remain competitive on those bids. I can only hope we're all smiling again early next year.

About the Author

Michael Eby

Mike received a B.S. degree in electrical engineering in 1986 and an M.S. degree in engineering management in 1994 from the University of South Florida. He is currently a member of the National Fire Protection Association (NFPA), Institute of Electrical and Electronics Engineers (IEEE), Association of Energy Engineers (AEE), and American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE).

Prior to joining EC&M as Editor-in-Chief in September 1999, Mike served as the Executive Editor of Transmission & Distribution World magazine for five years. He currently serves as the Senior Director of Content - Buildings Group in the Infrastructure & Intelligence Division at Informa. Before joining Informa, Mike held various engineering titles within the Substation and Transmission Engineering Groups at Florida Power & Light Co., Juno Beach, FL.

Mike was awarded the Southeastern Electric Exchange (SEE) Excellence in Engineering Award in 1993 and has received numerous regional and national editorial awards for his reporting and writing work in the electrical market.

Voice your opinion!

To join the conversation, and become an exclusive member of EC&M, create an account today!

Sponsored Recommendations

Electrical Conduit Comparison Chart

CHAMPION FIBERGLASS electrical conduit is a lightweight, durable option that provides lasting savings when compared to other materials. Compare electrical conduit types including...

Fiberglass Electrical Conduit Chemical Resistance Chart

This information is provided solely as a guide since it is impossible to anticipate all individual site conditions. For specific applications which are not covered in this guide...

Considerations for Direct Burial Conduit

Installation type plays a key role in the type of conduit selected for electrical systems in industrial construction projects. Above ground, below ground, direct buried, encased...

How to Calculate Labor Costs

Most important to accurately estimating labor costs is knowing the approximate hours required for project completion. Learn how to calculate electrical labor cost.