In light of big drops in public sector dollars, institutional and public works starts suffer. Institutional building starts could drop 15% to $93.6 billion in 2011 and slip another 2% to $92.1 billion in 2012. School construction, in particular, would drag down the sector, with total spending forecast to drop 13% to $40.9 billion in 2011.

Public buildings also remain on a downward skid with starts estimated to drop 27% to 24 million square feet in 2011 and another 9% to 22 million square feet in 2012.

“Overall, this sector is in the midst of entrenchment and I don’t see how that could change in 2012,” Murray said, noting that tax state and local revenues are still strained.

Healthcare May Head Down, Too

Meanwhile, health care starts could drop 4% to $22.5 billion this year. Murray noted that uncertainty about new federal healthcare legislation and the threat of reductions in Medicare and Medicaid as a means of reigning in the federal deficit has had a dampening effect this year.

As the transportation sector begins to run out of funds from the American Recovery and Reinvestment Act, starts will ebb. In 2010, the highway and bridge market hit an historic high of $58.8 billion in 2010 and could drop 8% to $54 billion this year, followed by another 7% drop to $50.2 billion in 2012.

Environmental public works starts also continue to drop from historic highs. Since tallying $38.3 billion in starts in 2008, activity has been in decline. This year, it is forecast to hit $28.6 billion followed by a 5% drop to $27.3 billion in 2012.

Electric utility starts appear to be hitting a peak this year with a record $42 billion expected—a 48% increase from 2010. Next year, Murray expects activity to pull back 24% to $32 billion, which would be the second highest level of activity on record.

Although Murray says he expects total construction starts to remain flat in 2012, he is careful to note that such results would be based on roughly 2% GDP growth. If the economy sees a double-dip recession, total construction could drop another 7%. However, Murray forecasts that another recession is unlikely.

“The market is stabilizing,” he said. “It’s setting the stage for more full-fledged expansion in 2013 or 2014."