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For Builders, the Storm Is Good for Business

Bad news for hurricane-ravaged homeowners is good news for at least one contingent: construction companies and the army of workers they plan to hire, many of whom have been idled and ailing from the housing bust for nearly half a decade.

Photo by Adam Jeffery for CNBC.com

Two days into the destruction from Hurricane Sandy, phones were ringing nonstop at Garden State Public Adjusters in Marlton, N.J., ProStar Residential Disaster Cleanup in Milford, Conn., and other businesses along the Eastern Seaboard. Construction crews cannot get into many of the affected areas yet, because of flooded streets, detours and debris. Even so, customers were lining up, begging for help to pluck branches out of windows, suck water from basements and living rooms, and rebuild damaged roofs and homes.

It is an exercise many contractors had been through before.

"I always look forward to a natural disaster," said Doug Palmieri, owner of Palmieri Construction in Middlefield, Conn. "The last two storms we had around here, the snow we had included, helped out the contracting business quite a bit."

Construction companies and insurance adjusters that are newer or less known have begun circling waterlogged neighborhoods in their cars and trucks and distributing fliers, handshakes and condolences.

"I drove around with my truck and a couple people stopped me and asked me for a business card," said Mayara Goncalves, owner of Queiroga Construction in Bridgeport, Conn. "Unfortunately for everyone else, it's going to be good for us."

The five-person Queiroga Construction is hoping to meet demand with longer hours and subcontractors. Many construction companies along the East Coast, though, say they expect to hire, although the magnitude of the work and the number of additional laborers are still to be determined.

"There is going to be so much manpower required, and we are already spread so thin," said Bill O'Connell, president of Elite Public Adjusters, which runs both an insurance adjustment company and a restoration and construction business in North Wildwood, N.J. He expects at least a million dollars of work from this storm. "I'm a little worried about being overwhelmed. The phones are ringing off the hook and we won't be able to get to a lot of people."

Some companies expressed concern about finding enough workers quickly, given that the slowdown in construction over the last few years has caused workers to seek their fortunes elsewhere.

(Read More: After Storm, Businesses Try to Keep Moving )

"Over the course of the recession, 60 to 75 percent of construction workers left the area because there was no work to keep them busy," said Pat Broom, owner of Phoenix Restoration, a 15-year-old company in Kill Devil Hills, N.C., on the Outer Banks. "That's the first thing we worried about this morning when we got in: Where do we get the people?"

Even in areas where people are desperate for work, some companies say they have trouble finding workers with the skills and motivation for hard physical labor.

"The challenge is going to be finding help," said John Scotti of Scotti Brothers Custom Home Renovation in Cumberland County, N.J. "The phone doesn't stop ringing with people looking for jobs, and then you bring them in and they don't want to work. The only ones that want to work are those who are here illegally."

Businesses are hoping that the burst of construction work will draw back workers to their areas. Last year, the rebuilding efforts from Hurricane Irene attracted construction workers and insurance adjusters from as far away as Texas.

So far, though, companies said they have been inundated with more calls for work than job applicants. Some expect workers to start flowing into affected areas later this week when transportation returns to normal.

While some pleas for service are coming in steadily and urgently, it will probably take awhile for the bulk of the construction jobs to get going in earnest.

First, the areas need to dry out sufficiently for crews to begin work, which could take days to weeks. After Tropical Storm Ernesto in 2006, said Ms. Broom of Phoenix Restoration in the Outer Banks, it took two weeks for the standing water to dry in some areas. In the meantime, septic systems overflowed and bacteria festered, making the jobs more complicated and expensive.

Many homeowners are also waiting for insurance companies to come through with money or at least an assessment, a process that can take days or months.

(Read More: Sandy's Economic Cost: Up to $50 Billion and Counting)

"Especially with the way the economy is, people don't have money just sitting in the bank to pay for a $20,000 or $30,000 job," said Victor Rosado, owner of Professional Home Builders in Milford, Conn. And often, people struggle to come up with the costs that insurance does not cover.

"No one's ever whole after something like this," Mr. Rosado said. "They tend to think that the insurance company will come in and make everything whole, but that never happens."

He said that money from the Federal Emergency Management Agency may help hasten the pace of reconstruction, since President Obama authorized federal aid for parts of the country struck by the storm.

The other reason reconstruction may drag on over the next year is that many of the affected areas — like the Jersey Shore or the Outer Banks — are vacation areas, and the vacation season is over. Some owners have started calling construction companies and claims adjusters to survey the damage. Others are hundreds of miles away and out of touch.

Even those in the affected area or somewhere nearby may not have power and are having difficulty contacting contractors, insurance companies and other services.

While construction companies and their new hires may profit from the destruction, homeowners and companies are out billions of dollars for their physical damages and lost business hours, which can ripple through local economies. But one longer-term benefit might be new building stock that is better than what was swept away, as was the case in rebuilding along the Outer Banks in North Carolina after previous storms.

"When government authorities facilitate rebuilding quickly and effectively, the process of economic renewal, in many tangible ways, can leave communities better off than before," said Peter Morici, an economics professor at the Smith School of Business at the University of Maryland.

He estimated that the economic losses from Sandy would be $35 billion to $45 billion, but that economic benefits from reconstruction and its ripple effects would total about $27 billion to $36 billion, not including gains of about $10 billion "from a more modern and productive capital stock."

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