What now for the Surety Bond Industry? Part II

The Leaderboard Magazine recently contacted three industry experts, Ken Simonson, Lawrence LeClair and Lenore Marema (bios below) on the future of the surety bond industry.

Part II: Uncertainty Remains

In spite of the election, Simonson said, there appears to be just as much economic uncertainty in the country as there was before the election.

“Nevertheless,” Simonson said, “elections do make a difference.” With the re-election of President Obama and the continued division between the parties in Congress, Simonson predicts several developments:

• There is an increased likelihood of higher tax rates on high-income individuals, including contractors who operate as partnerships and S- corporations.
• It is also likely that spending cuts will not be as severe, sparing some of the blow to contractors working on projects for the U.S. Army Corps of Engineers, the Naval Facilities Engineering Command (NAVFAC) and the General Services Administration.
• Contractors tied to coal mining regions or suppliers, railroads and utilities linked to coal will have a faster-shrinking market than if Mitt Romney had been elected.
• Contractors who want to employ legal immigrants will have an easier time of doing so.

In general, Simonson expects that construction will continue a slow and uneven recovery in 2013.

“There should be strong activity related to oil and gas drilling, transportation and processing; other manufacturing; private higher education; and multifamily construction,” Simonson said.

He expects that “public spending categories, including most infrastructure, will be flat to  slightly down.”

“Office, retail and health care spending are likely to remain weak,” Simonson added. “The big unknown is whether the recovery in single-family homebuilding will continue. I’m guessing it will for a few more months, but then will stall at a much lower level than last decade I think overall spending will rise by 7 to 10 percent, much like this year.”

Ken Simonson is the Chief Economist for The Associated General Contractors of America in Arlington, Va.

Lawrence LeClair is Director of Government Relations for the National Association of Surety Bond Producers in Washington, D.C.

Lenore Marema is Vice President of Government Affairs for the Surety & Fidelity Association of America in Washington, D.C.