WASHINGTON, DC–Construction spending in May totaled $1.230 trillion at a seasonally adjusted annual rate, an amount that was unchanged from the upwardly revised April total, according to Census Bureau statistics released last month. [see charts below]. Now, a new analysis by the Associated General Contractors of America adds some color to those numbers, primarily by noting that contractors are having trouble finding enough labor to keep projects on schedule and also that political gridlock is holding back construction sector growth.

“Spending on most types of private construction has remained relatively flat from month to month so far in 2017 but at a higher level than in the same period of 2016,” Ken Simonson, the association's chief economist said in a prepared statement. “By contrast, public investment in infrastructure has generally declined from last year's levels despite a pickup from April to May.” Simonson's take: private demand for building is healthy, but gridlock in Congress and in several state governments is on track to depress public infrastructure spending.

Looking For Qualified Workers

Let's start with the growing scarcity of construction labor. There was a 6.1% increase from January through May 2017 over the same period in 2016. That shows overall demand for construction remains positive. However, at the same time there has been a recent flattening of investment. That coincides with more frequent reports that contractors and home builders are stretching out completion times because they cannot find enough qualified workers, according to Simonson.

Healthy Demand In The Private Sector

It is clear that demand for construction — both commercial and residential — remains healthy. Indeed some of the figures are downright heartening for the commercial real estate sector. The commercial sector (retail, warehouse and farm) construction decreased 1% in May but climbed 15.2% year-to-date. And private office construction increased by 0.8% for the month and 16.9% year-to-date.

Meanwhile private residential construction spending slipped by 0.6% between April and May 2017 but gained 12.4% year-to-date. Spending on multifamily residential construction dropped 3.3% for the month and was up 6.2% year-to-date, while single-family inched down 0.3% from April to May and was up 7.3% year-to-date.

A Decline In Public Construction Spending

By contrast, public construction spending grew 2.1% from the prior month but declined by 3.5% for the first five months of 2017 combined.

The biggest public segment — highway and street construction — dipped 0.9% for the month and 1.3% year-to-date. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction inched down 0.2% year-to-date; spending on sewage and waste disposal plummeted 21.5%; and spending on water supply fell 11%.

“Washington officials must enact measures to support career and technical education and to get our aging roads, bridges and water systems back to a state of good repair,” said Stephen E. Sandherr, the association's chief executive officer, said in a prepared statement.

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Looking For Qualified Workers

Healthy Demand In The Private Sector

A Decline In Public Construction Spending

By contrast, public construction spending grew 2.1% from the prior month but declined by 3.5% for the first five months of 2017 combined.

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Construction Worker Shortages, Political Gridlock Keep Spending Flat

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