Construction workers are about to lose their hard hats.

An estimated two-thirds of the country's nonresidential construction companies are planning to cut their payrolls this year, which will result in a projected 30 percent decline in the number of people working on construction projects, according to employment and business forecast figures released by the Arlington, Va.-based Associated General Contractors of America (AGC). The forecast results are based on a representative survey conducted by the construction association in late 2008.

"I am not surprised that two-thirds of companies may have to lay off workers; nearly all segments of construction are experiencing rapidly shrinking backlogs," says Kenneth D. Simonson, the association's chief economist. "I would be surprised if the cuts are as deep as 30 percent. That may mean the contractors who answered the survey are particularly pessimistic or that I'm congenitally optimistic."

The association's member companies have seen or are planning for declining activity in every type of construction market, according to the forecast figures: 92 percent of building contractors and 93 percent of road builders are expecting or experiencing declining activity. More than 83 percent of utility contractors are bracing for declines, while 77 percent of water resource contractors are expecting a decline in business for building levees or locks.

The forecast indicates that planned investments in infrastructure projects as part of the stimulus package would likely dramatically improve the dismal outlook. Eighty-five percent of nonresidential construction companies would either cancel layoffs or add new employees if states embarked on stimulus-funded infrastructure projects. Plus, construction companies predicted their payrolls would increase by 25 percent, and they'd invest an average of $500,000 this year in equipment, if they received new work as part of the stimulus package.

"AGC believes quick enactment of a large stimulus package with a major infrastructure component is important not just for the construction industry and its suppliers but will also add productive assets of lasting value to the nation's capital stock," Simonson says. "That will help bring about a more sustainable recovery than a one-shot spending stimuli."