Nonresidential construction spending rose 0.5% in September, totaling $698.1 billion on a seasonally adjusted basis, according to an Associated Builders and Contractors (ABC) analysis of data from the U.S. Census Bureau. However, nonresidential construction spending is down 2.9% on a year-over-year basis, with construction spending related to manufacturing down 20.3% since September 2016. August and July nonresidential spending totals were revised upwards by a collective $11 billion, however.
“There is a lot of positive news about the U.S. economy right now,” said ABC Chief Economist Anirban Basu. “The nation has added nearly 1.8 million net new jobs over the past year, the official unemployment rate stands at a 16-year low and asset prices have skyrocketed. Those factors have given American household wealth a boost. Despite all of that, nonresidential construction spending is down on a year-over-year basis by nearly 3%.
“Much of this is due to declining public spending in water supply and other public sector categories, but not all,” said Basu. “Key private segments like manufacturing and power have also experienced diminished construction activity. A likely partial explanation is the low commodity prices that characterized much of 2015 and 2016.
“At the same time, construction firms are boosting employment levels, with many firms reporting that the retirement of experienced workers is resulting in rapid hiring of other workers who are hopefully trainable, but who are not yet as productive on a one-for-one basis,” said Basu. “For many firms, this dynamic is likely squeezing profit margins. Many firms are also offering significant pay increases to their most talented workers to enhance retention and delay retirement.
“All of this is consistent with the notion that proposed policy initiatives that would better support U.S. economic growth remain important even in the context of an improving economy,” said Basu. “Beyond the tax reform initiative currently in the spotlight, one hopes that an infrastructure-led stimulus package funded primarily by private investors receives more focus during the months to come.”
Related Stories
Market Data | Sep 3, 2020
6 must reads for the AEC industry today: September 3, 2020
New affordable housing comes to the Bronx and California releases guide for state water policy.
Market Data | Sep 2, 2020
Coronavirus has caused significant construction project delays and cancellations
Yet demand for skilled labor is high, new survey finds.
Market Data | Sep 2, 2020
5 must reads for the AEC industry today: September 2, 2020
Precast concrete tower honors United AIrlines Flight 93 victims and public and private nonresidential construction spending slumps.
Market Data | Sep 2, 2020
Public and private nonresidential construction spending slumps in July
Industry employment declines from July 2019 in two-thirds of metros.
Market Data | Aug 31, 2020
5 must reads for the AEC industry today: August 31, 2020
The world's first LEED Platinum integrated campus and reopening campus performance arts centers.
Market Data | Aug 21, 2020
5 must reads for the AEC industry today: August 21, 2020
Student housing in the COVID-19 era and wariness of elevators may stymie office reopening.
Market Data | Aug 20, 2020
6 must reads for the AEC industry today: August 20, 2020
Japan takes on the public restroom and a look at the evolution of retail.
Market Data | Aug 19, 2020
6 must reads for the AEC industry today: August 19, 2020
July architectural billings remained stalled and Florida becomes third state to adopt concrete repair code.
Market Data | Aug 18, 2020
July architectural billings remained stalled
Clients showed reluctance to sign contracts for new design projects during July.
Market Data | Aug 18, 2020
Nonresidential construction industry won’t start growing again until next year’s third quarter
But labor and materials costs are already coming down, according to latest JLL report.