Associated General Contractors' Ken Simonson

WASHINGTON, DC—Monthly declines in the public sector brought construction spending overall down 1.3% in June to a seasonally adjusted annual rate of $1.206 trillion, the Census Bureau said Tuesday. The 5.4% drop in government spending was the biggest monthly decline since 2002.

On a year-over-year basis, construction spending overall is still up by 1.6% from June 2016 levels. However, the Y-O-Y gains are all in the private sector: total private construction expenditures were up a seasonally adjusted 5.3% from the year prior, while spending in the private sector was down by 9.5% over the same period, for the lowest seasonally adjusted monthly spend since February 2014. The biggest public-spending category, highway construction, was down 6.6% from May and 8.1% Y-O-Y to a seasonally adjusted $82.4 billion.

“Construction spending is still increasing overall, but growth has become much more uneven across categories in recent months,” says Ken Simonson, chief economist with the Associated General Contractors of America. “There has been a steep decline in public investment in nearly all types of construction over the past year. Private nonresidential construction is still rising overall but generally at slower rates than was occurring a few months ago.”

In the private sector, the largest nonresidential segment was power construction (including oil and gas field and pipeline projects), which dropped 5.4% from a year ago. The next-largest segment, commercial construction—including retail, warehouse and farm properties—rose 13.8% Y-O-Y. Private office construction was up 12.6% from June '16.

Private residential construction spending ticked downward by 0.2% from the previous month, but was up 9.2% Y-O-Y. Spending on multifamily construction was up 0.6% from the year-ago period; single-family spending rose 9% during the same time period.

However, the declines in spending don't appear to have had a negative impact on employment in construction-related fields during June. Associated Builders and Contractors reported Tuesday that the not-seasonally adjusted unemployment rate for the industry was 4.5%, the lowest June rate yet recorded.

“Not only was this the lowest national not seasonally adjusted June construction unemployment rate on record, but all the states had estimated construction unemployment rates below 10%,” says Bernard M. Markstein, president and chief economist of Markstein Advisors, who conducted the analysis for ABC. “That is an indication of the health of the construction industry, although a shortage of skilled construction workers still appears to plague the industry.”

Instant Insights /

Construction Spending Ticks Downward in June

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