AGC: Construction spending dips in October

Total construction spending dropped 0.3 percent in October with downturns in homebuilding and most major nonresidential categories, according to an Associated General Contractors of America (AGC) analysis of federal spending data.

AGC officials say contractors are struggling to complete projects as the number of open positions at the end of October topped hires in the month.

“Most nonresidential contractors report full order books but are having trouble hiring enough workers to keep projects on schedule,” says Ken Simonson, AGC’s chief economist. “Rising interest rates and costs for materials are likely to choke off some projects, but there will be plenty of infrastructure, manufacturing plants and renewable energy projects next year – if contractors can find enough workers to build them.”

Construction spending in October, not adjusted for inflation, totaled $1.79 trillion at a seasonally adjusted annual rate – 0.3 percent below the September rate but 9.2 percent above the October 2021 rate. Spending on private residential construction declined 0.3 percent, marking the fifth consecutive month of declines for the sector. Spending on private nonresidential construction fell 0.8 percent in October, and public construction investment slumped 0.9 percent.

Residential spending was hindered by a 2.6 percent drop in single-family homebuilding, which offset increases of 0.6 percent in multifamily construction and 2 percent in residential improvements. The largest nonresidential segment, commercial construction – comprising warehouse, retail and farm construction – declined 0.4 percent. Among other large nonresidential categories, highway and street construction slid 0.7 percent and manufacturing construction dropped 3.3 percent. In contrast, power construction grew 1.5 percent.

Construction industry job openings totaled 377,000 at the end of October. That mark exceeded the 341,000 employees hired during the month, according to government data. The gap implies that contractors wanted to hire more than twice as many people as they were able to bring on board and most likely contributed to the decline in spending put in place, Simonson says.

The final word

AGC officials say labor shortages remain one of the top concerns for most construction firms. They urge Congress and the Biden administration to allow more immigrants with construction skills to enter the industry to provide short-term relief.

Still, AGC maintains that the best way to resolve workforce shortages is to boost federal funding and support for construction-focused education and training programs.

“You can’t be both for infrastructure and against boosting investments in preparing workers to build that infrastructure,” says Stephen Sandherr, AGC’s CEO. “Until federal officials narrow the five-to-one gap in federal funding for college prep versus craft career development, labor shortages will restrain the industry’s ability to rebuild the economy.”