Construction Spending Declines in October and Job Growth Slows in November
Construction projects and job growth are being affected by uncertainty in the U.S. economy.
The construction industry in the United States has been enjoying steady, gradual growth over the last year. In October, single-family homes were being built at the highest rate since the 2007 recession. But despite this solid and seemingly unflappable upward trend, the last few months have begun to show some warning signs that things may finally be slowing down.
The latest data shows that construction spending declined 0.8 percent in October from September, topping last year’s levels by just 1.1 percent. And while single-family homebuilding has enjoyed a recent revival, decreases in private nonresidential, multifamily and public projects have outweighed those positive results.
“A drop in mortgage interest rates has given a boost to single-family homebuilding in recent months, but these gains have been offset by weak private nonresidential spending as trade friction drags down U.S. economic growth,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Businesses that have been hurt by existing tariffs and retaliatory actions by U.S. trading partners or firms facing uncertainty over future trade policy are likely to hold off on construction projects.”
Adding to that uncertainty is another recent report that gains in construction employment have slowed over the last month. After increasing by 10,000 jobs in October, the construction industry added just 1,000 new jobs in November. While this drop off is certainly alarming, the AGC believes that it may be caused by shortages in the labor pool, not a slump in demand.
“Contractors report they remain busy and have lots of projects on their order books,” said Simonson. “But they find it extremely difficult to fill many positions despite paying more than other industries. That’s not surprising, given that the total unemployment rate returned to a 50-year low in November—a sign that all industries are competing for workers.”
With unemployment so low, it makes logical sense that there would be fewer new jobs in the economy. Still, the AGC believes that construction labor shortages are something that needs to be addressed by the federal government, starting with Congress and the Trump administration.
The association is advocating for the passing of the JOBs act, a bill that would help students access training for the 7.3 million vacant jobs that are unfilled in part due to a shortage of qualified workers. The bill was introduced in March 2019 and is still stuck in the first stage of the legislative process.
“Labor shortages are making it harder for firms to keep pace with demand, and more important, it is making it harder for them to add new people to their payrolls,” said Stephen Sandherr, the association’s chief executive officer. “Making it easier for young adults to acquire construction skills and for skilled workers to enter the country when they are needed will put many more people to work in high-paying construction careers.”
While making it easier for young people to gain the skills they need for jobs in the industry is a good start, it is also important to pay attention to any possible signs that the industry may be slowing down. It took a long time for workers to return to the construction industry following the 2007 recession. Another recession, however minor, may be a major blow to an industry that needs to start appealing to younger generations as a potential career path.