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06.17.2009
Midwest Malaise
The worst may be over, just not for regional architects
The AIA Billings Index by region from May 2007 through April 2009
Dustin Koda/The Architect's Newspaper

The recession may not be over, but the growing consensus is that the worst is past—including for architects. Still, not all parts of the country are recovering as quickly as others. With the near-collapse of the auto industry and manufacturing at large, the Midwest continues to lag behind much of the nation, putting an additional damper on the work of local firms.

The national AIA has been crowing these past two months, as its Architecture Billings Index has risen significantly to levels not seen since last summer. Furthermore, inquiries have risen during the same period into positive territory, another benchmark not seen since last September, when, along with billings, they began to fall to record lows in the index’s 14-year history.

For March, billings nationally reached 43.7, up from 35.5 in February and a historic low of 33.3 in January. Inquiries rose to 56.6 in March, from 49.5. In April, billings were 42.8 and inquiries 56.8. A score below 50 means the index is falling, while a number above 50 means it is rising. “This is the way cycles normally play out, with an accelerating decline, followed by moderating decline, and then moderating growth,” said Kermit Baker, the AIA’s chief economist. “Anything can happen, but certainly the broader news is pointing to things beginning to stabilize.”

In some ways, this applies to the Midwest, too, but at a lagging pace. According to the regional billings index, the Midwest is up, though still further down than other regions. In April it had a reading of 40.1, up from 37.5 in March, and a low of 31.4 in November. The Northeast and South are faring better, at 47.1 and 45.0 respectively, while the West is slightly worse off, at 39.2.
   
This disparity can be explained largely by the unique challenges each region faces. In the case of the Northeast, when banks collapsed last fall, it froze the economy, leading to the lowest localized readings ever, at 29.5. But when the bank bailout passed, credit returned, uncertainty abated, and the market shot back up. Meanwhile, the South has largely been buoyed by oil. On the flipside, California’s looming bankruptcy and the Sunbelt housing bust have severely diminished confidence out West, while the uncertainty about GM and Chrysler’s futures has largely hamstrung the Midwest.

Dave Zwicke, an economist at the Skokie, Illinois–based Portland Cement Association, is quick to point out that the Midwest was mostly spared the vagaries of the housing bubble, but this still created problems since regional manufacturers had to cut production. “When durable goods orders went down, it really started to create problems,” he said.  And as the recession spread around the globe, driving down exports, it further worsened the situation.  Then came the final blow. “The auto industry was lagging for a long time, but late last year when it really started to collapse, people started to notice,” Zwicke said.

Though the future of the Big Three is far from rosy, it is no longer uncertain. The hope is, this move, as with the earlier one in banking, will finally return some stability. Alan Cobb, vice-president of AIA Michigan, believes this is the case, as there is still plenty of demand in the region for work, but up to now, no money for it. “It’s been doom and gloom for a long time around here, but I think that’s coming to an end,” he said.

Matt Chaban