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Over the last few months, there has been significant softening in non-residential construction spending growth, which means less hiring. According to the “Marcum Commercial Construction Index,” the overall U.S. construction industry shed 27,000 positions during the three-month period ending in June.
Marcum’s chief construction economist, Anirban Basu, who authored the report, attributes the slide in spending to several factors, including savings from lower commodities prices being passed along to developers, resulting in lower construction costs.
Inactivity in public investment, particularly in the highway and street, educational, and sewage and waste disposal categories, also impacted non-residential spending, which fell 5.9 percent in June, year-over-year.
Additionally, weakness in the global economy produced a double-digit decline in manufacturing-related construction as U.S. exports continued to decline. Low oil and natural gas prices were another influence on the construction industry in general, with particular impact in areas like Dallas, Oklahoma City, and Houston, where employment construction had previously sustained a prolonged surge. Technology-intensive markets including Boston, San Francisco, and Seattle were the beneficiaries of construction employment growth as industry activity in the industrial categories slowed.
Marcum noted an improvement in July data, following the slow-down of the year’s first six months. Roughly, 11,500 jobs were added in the commercial construction sector during the month; heavy and civil engineering construction gained 1900 jobs after losing ground steadily from January to June. The unemployment rate for the non-residential construction sector for the month improved to 4.5 percent.
“It should be concerning to construction industry leaders that while sector employment declined during a recent three-month stretch, industry unemployment also fell,” said Basu. “The implication is that fewer people are making themselves available for construction work. Presuming the construction recovery continues, this implies sharper increases in wages and benefits going forward, which, all things being equal, will squeeze industry profit margins.”
For the complete Marcum Commercial Construction Index for second quarter 2016, click here.
