Wednesday, December 12, 2012 - Building Fuels Inland Boom Bakersfield Is Helping Lead California's Construction Sector Out of the Slump December 11, 2012, 6:57 p.m. ET


Building Fuels Inland Boom
Bakersfield Is Helping Lead California's Construction Sector Out of the Slump
December 11, 2012, 6:57 p.m. ET

BAKERSFIELD, Calif.—This Central Valley oil town, once hard-hit by the sluggish economy and housing slowdown, is helping lead a resurgence in California's construction industry and providing a hopeful sign for many of the state's inland areas.

During the housing boom, lower-cost inland areas like Bakersfield, Modesto and the Inland Empire east of Los Angeles saw home construction surge, only to crash when lending dried up, leaving huge amounts of unsold inventory. But the industry appears on the mend, with construction employment up year-over-year statewide every month since February amid growth in the technology, energy and international-trade industries, among other factors.

Matt Towery, a 54-year-old home builder, will build 50 homes here this year, versus 24 last year. He is taking his family out to eat more often and plans to buy a replacement soon for a Ford F-350 pickup truck that is nearly 10 years old. "We were stung so hard, it's taken us a long time to come back," Mr. Towery said at a new-home site in late November.

In October, construction employment in California increased by 27,700 jobs, or 5% from a year earlier, according to the Associated General Contractors of America, a trade group. California's unemployment in October fell to 10.1% from 11.5% a year earlier, according to the U.S. Bureau of Labor Statistics.

While the construction recovery in the state is broad-based, the hottest market is Bakersfield, a city of about 350,000 more than 100 miles north of Los Angeles. Surrounding Kern County is one of the biggest oil-producing places in the country, with nearly 40,000 working wells—many within the city itself—that account for the bulk of California's crude output. The city also has become a hub for warehouses and industrial parks that serve Southern California.

Commercial and residential construction jobs in the Bakersfield metro area rose 5% in October from a year earlier, one of the strongest growth rates in the nation, according to the contractors' group. After losing 40,000 total jobs—including 39% of construction jobs—between 2007 and 2010, the Bakersfield area has regained all but about 3,000, according to state data. Construction employment is running 2,800 jobs, or 15%, below 2007 levels.

"It's not any one thing, but a lot of things adding up," said John Emery, dean of the school of business and public administration at California State University, Bakersfield. "It's a great time to be here."

Economists warn that Bakersfield, like California, isn't out of the woods. Kern County's October unemployment rate of 12.2%, while down from 13.5% a year earlier, exceeded both the state and U.S. rate. And despite a rebound in housing starts here and statewide this year, the markets remain well below prerecession levels. Median prices for an existing single-family home plunged 61% in Kern County and 57% for the state as a whole between 2006 and 2009, and they have rebounded to 48% below 2006 levels, according to the California Association of Realtors.

Restoring construction is important, economists say, because it generates many other jobs. Randy Salcido, a plasterer on a three-bedroom project of home builder Mr. Towery, said he and his wife have begun going to movies again after he regained his job three months ago after being sporadically employed since 2008.

Nearby, workers put finishing touches on a four-story cancer center for San Joaquin Community Hospital. An improving economy helped the hospital raise $5 million in donations of the $36.5 million needed for the project, which broke ground in 2011, said Jarrod McNaughton, a hospital vice president. The project, which was completed earlier this month, employed as many as 100 construction workers.

A more-than-doubling of oil prices since late 2008 and increases in California's foreign trade have helped accelerate construction at a 1,400-acre industrial park outside Bakersfield owned by Roll Global LLC. The Los Angeles company has leased 250 acres for warehouse construction to energy and other companies over just the past 18 months, compared with 300 acres over the prior decade, said John Ritchie, vice president of commercial development for a Roll division.

One recent deal was for construction of a 55,000-square-foot facility for Weatherford International Ltd., WFT -0.82%a Swiss oil-field-services firm, to make drilling equipment.

"When oil goes up, you see people reinvesting," said Les Clark, executive vice president of the Independent Oil Producers' Agency in Bakersfield.

Amid the commercial-building uptick, countywide permits for single-family housing have more than doubled this year to more than 900, although that is still less than one-fifth the 2006 peak of 6,000, according to county data.

Bakersfield's Lenox Homes went from building 500 homes in 2005 to 69 in 2010, and it is back up to about 100 this year. "At the end of the day," said David Cates, Lenox Homes' president, "we survived."

Write to Jim Carlton at

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