In the wake of the coronavirus outbreak, the government in many U.S. states declared construction an essential business, allowing job sites to remain open.

But today, the industry is struggling under the weight of canceled projects, fears over liability and threats the government's Paycheck Protection Program will no longer cover the industry, forcing firms to return PPP funds and slash more jobs, according to the Associated General Contractors of America.

“Construction employment declined by 975,000 jobs between March and April, or 13% of the industry’s total workforce,” AGC Chief Economist Ken Simonson said Friday.

"By far this is the worst-ever one month decline in construction employment," he said while revealing the results of AGC's latest survey of construction firms.

Construction's unemployment rate grew from 4.7% in April 2019 to 16.6% last month and would have been much worse were it not for the industry's ability to apply for loans under the PPP, but now conflicting government guidance is threatening that avenue of relief, Simonson said.

“Eighty percent of [survey] respondents report having applied for these loans,” Simonson said. “The vast large majority of these applicants were approved and received the funds. Unfortunately, recent announcements by the Treasury Department and revisions to its guidance for these loans have prompted quite a few construction employers to continue returning those funds.”

Simonson said 18% of surveyed firms said they may return PPP loans due to threats the government could prosecute businesses that collect funds when they have access to other forms of credit. This will lead to more economic strain and job cuts, the economist warned.

The advocacy group is asking the Treasury Department to create clarity on whether construction outlets qualify for PPP loans when they rely on other lines of credit to meet government bonding requirements during projects. The question is whether those credit lines push them out of the program or do not count against them.

“These new doubts about the federal loan program are one reason why 12% of firms report they anticipate they will need to cut staff during the next four weeks,” he added.

Surveyed construction firms also worry reopening sites and remaining economically viable depends on the federal government creating a safe harbor to protect work sites and construction firms from liability if coronavirus infections or employee health issues surface on work sites despite compliance with safety protocols.

“Sixty-one percent of our respondents say Congress should enact a safe harbor set of protocols to provide firms with protection from tort or employment liability from failing to prevent a COVID-19 infection,” Simonson said.

Aside from concerns about government policies, construction firms interviewed don't see an immediate bounce back for the industry in late 2020.

Thirty-seven percent of those surveyed said clients have asked them to stop construction activity out of fear of the pandemic. Another 31% of owners canceled projects because of falling demand, the association said.

Meanwhile, 21% say private funding losses caused cancellations, while 30% of projects fell off the wire because of government orders halting work.

About 67% of surveyed firms said they had a project canceled or delayed since the onset of the pandemic in early March.

To stop the bleeding, construction firms are asking for more government clarity around PPP loans and other possible sources of government aid to ensure the industry remains largely open and able to employ workers.