Residential Spending and Employment Surge; Private Nonresidential Spending Soars in First Half of Year but Shrinking Public Investment Threatens to Hold Down Nonresidential Job Gains, Association Officials Warn

Aug 1, 2014 -- New government data today show the uneven nature of the construction industry’s recovery, as the sector added 22,000 jobs in July, but suffered a pullback in spending in June, according to an analysis by the Associated General Contractors of America. Association officials said that uncertainty about federal funding for a range of infrastructure and construction programs is one reason for the uneven recovery.

“Construction employment and spending are both rising at a moderate year-over-year clip, but there have been some setbacks,” said Ken Simonson, the association's chief economist. “While prospects for private construction remain largely favorable, inadequate public investment still threatens to keep too many workers idle.” 

Construction employment totaled 6,041,000 in July, the highest total since May 2009, while the industry’s unemployment rate of 7.5 percent was the lowest July number in seven years, Simonson noted. The sector’s employment rose by 211,000, or 3.6 percent, from a year earlier.  Residential construction employers added 13,000 jobs in July and 115,600 (5.3 percent) over 12 months. Nonresidential construction employment increased by 9,100 for the month and 95,700 (2.6 percent) since July 2013. Simonson attributed the weaker growth in nonresidential employment to a decline in public construction spending.

“While the preliminary spending numbers for June show all segments of construction retreated from May levels, looking at the first six months of 2014 as a whole in comparison with the same period a year ago provides a more credible picture of construction trends than does a single-month snapshot,” Simonson commented. “For the first half of 2014, private spending climbed at double-digit rates, while public construction shrank. I expect both patterns to continue.”

Construction spending in June totaled $950 billion at a seasonally adjusted annual rate, down 1.8 percent from the upwardly revised May total, Simonson noted. Spending for the first half of 2014 as a whole increased 7.8 percent from the same period in 2013.  Private nonresidential spending fell 1.6 percent in June but increased 12.6 percent year-to-date, while private residential spending slipped 0.3 percent for the month but rose 10.3 percent year-to-date. Public construction spending slumped 4.0 percent from May to June and 0.9 percent year-to-date.

Association officials said a measure passed yesterday to keep federal highway and bridge funding at current levels through next spring will help, but the temporary fix will do little to clear uncertainty about future federal surface transportation investments beyond next May.  They urged Congress to quickly pass a long-term surface transportation bill that includes new sources of revenue needed to avoid future funding shortfalls.  They also urged Congress to enact measures to fund a range of other federal infrastructure and construction programs so contractors can make hiring and purchasing plans for next year.

“As welcome as the temporary highway funding measure is, it does nothing to address the revenue challenges that keep putting federal transportation funding levels at risk,” said Stephen E. Sandherr, the association’s chief executive officer.  “This is just another instance where Congressional delays are making it hard for employers to figure out how many people they should hire or how much equipment they should buy.”