Construction Spending Dips
Employment Rises in Metro Areas as Construction Spending Decreases
by the Associated General Contractors of America
Total construction spending slipped from December to January amid widespread severe weather, but outlays climbed strongly compared to January 2023, with year-over-year gains in every category, according to an analysis of a new government report that the Associated General Contractors of America released. Association officials noted, however, that some construction segments appear to be impacted by broader economic conditions.
“The dip in January is more likely due to bad weather than to weakening demand overall,” said Ken Simonson, the association’s chief economist. “But high financing costs and falling rents are dragging down income-dependent sectors like warehouse and retail construction, while single-family homebuilding and manufacturing remain solid.”
Construction spending, not adjusted for inflation, totaled $2.102 trillion at a seasonally adjusted annual rate in January. That figure is 0.2% below the upwardly revised December rate, but 11.7% above the January 2023 level.
Spending on private residential construction gained 0.2% for the month and 5.2% year-over-year. Single-family construction climbed 0.6% from December, the ninth-straight increase. Spending on multifamily projects, which has trended down since August, declined 0.4% in January.
Spending on private nonresidential construction inched down 0.1% in January but rose 15.2% from January 2023. The largest segments were mixed. Manufacturing construction rose for the seventh month in a row, by 2.0%. Commercial construction slumped 3.3% as warehouse, retail, and farm components each declined. Investment in power, oil, and gas projects rose 0.3%. Spending on private offices and data centers edged up 0.1%, while health care construction fell 0.2%.
Public construction spending decreased 0.9% for the month but jumped 20.1% from a year earlier. Spending on segments most exposed to severe weather declined: highway and street construction fell by 2.1% in January, sewage and waste disposal by 1.0%, water supply spending by 1.4%, and conservation and development outlays by 0.9%. Public outlays for educational structures declined 0.7%, while public spending on transportation facilities rose 1.4%.
Association officials urged federal leaders to take steps to accelerate new infrastructure investments. For example, they are calling on the Biden administration to reform its approach to implementing new Buy America, Build America rules to avoid the confusion and delays that are currently holding up projects.
“Federal investments in construction and infrastructure are likely to remain the largest driver of demand as long as private-sector finance costs remain high,” said Stephen E. Sandherr, the association’s Chief Executive Officer. “Eliminating needless confusion and delay in approving federal projects will keep construction demand, and employment, strong for the foreseeable future.”
Construction employment increased in 224 of 358 metro areas between December 2022 and December 2023, according to an analysis by the Associated General Contractors of America of new government employment data. Association officials noted that the industry still has nearly 400,000 unfilled positions nationwide, and likely would have added even more jobs if firms could find more qualified workers to hire.
“Even more metro areas would have added workers if they were available,” said Simonson. “But there were 374,000 job openings in construction at the end of December according to a separate government report, illustrating the difficulty contractors face in filling positions.”
Dallas-Plano-Irving, Texas added the most construction jobs, 12,300 jobs, 8%, followed by Phoenix-Mesa-Scottsdale, Arizona, 10,400 jobs, 7%; Riverside-San Bernardino, California, 10,000 jobs, 9%; Baton Rouge, Louisiana, 9,100 jobs, 18%; and Austin-Round Rock, Texas, 8,100 jobs, 10%. The largest percentage gain was in Sioux Falls, South Dakota, 20%, 2,000 jobs; followed by Tulsa, Oklahoma, 19%, 4,600 jobs; Baton Rouge; Danville, Illinois, 17%, 100 jobs; and Albuquerque, New Mexico, 16%, 4,000 jobs.
Construction employment declined over the year in 80 metro areas and was unchanged in 54 areas. The largest job loss occurred in Houston-The Woodlands-Sugar Land, Texas, -5,900 jobs, -3%; followed by Orange-Rockland-Westchester, New York, -4,500 jobs, -10%; Nassau County-Suffolk County, New York, -4,500 jobs, -5%; and Denver-Aurora-Lakewood, Colorado, -3,500 jobs, -3%. The largest percentage decreases, 10% each, occurred in Orange-Rockland-Westchester; Pittsfield, Massachusetts, -200 jobs; and Binghamton, New York, -400 jobs; followed by Albany-Schenectady-Troy, New York, -8%, -1,600 jobs.
Association officials noted that a recently released Senate immigration reform proposal would do little to help address construction labor shortages. The measure makes it harder for individuals to be granted work authorizations and proposes no changes to expand legal temporary worker visa programs that covers people seeking to work in construction.
The Associated General Contractors of America and its Louisiana AGC chapter filed suit in federal court to block the Biden Administration’s unlawful effort to mandate project labor agreements for major federal construction projects. Association officials noted that President Biden lacks the legal and constitutional authority to impose such sweeping labor policies that undermine current labor agreements for union firms and discriminate against open shop contractors.
“This new regulation is an unlawful solution in search of a nonexistent problem,” said Sandherr. “Current law prohibits the President from unilaterally imposing labor and employment terms that would disrupt existing agreements for union contractors and exclude open shop firms from competing for federal projects.”
In its legal filing, the association noted that the President’s project labor agreement regulation is beyond the scope of executive authority. Current laws governing federal procurement do not provide the President with the authority to impose labor policies as a precondition for securing projects. The complaint also notes that the regulation contradicts, among other things, the Procurement Act, the Competition in Contracting Act and the National Labor Relations Act in terms of limits that can be placed on competing for federal work and decisions of requiring union participation in the workforce.
“This regulation punishes firms that have already entered into a collective bargaining agreement with construction unions, discriminates against open shop firms and their employees, and deprives taxpayers of the benefits of open competition,” Sandherr added.
“The best way to address construction workforce solutions over the long-term is to boost investments in construction education and training programs,” said Sandherr. “However, the Senate immigration bill is a missed opportunity to provide some short-term relief while the nation rebuilds the domestic pipeline for preparing future construction professionals.”
