There is plenty of reason to be optimistic about the private nonresidential construction industry, according to the first-quarter Marcum Commercial Construction Index for 2017. Most sectors saw increases in construction spending, while the nonresidential construction industry specifically gave a boost to employment statistics.
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“Business confidence is in the 97th percentile, unemployment is near a 10-year low, and the Consumer Confidence Index has not been this high since December 2000,” said Anirban Basu, chief construction economist for Marcum and the report’s author. “This all bodes well for the U.S. construction sector, which stands to benefit from a combination of consumer and business spending growth.”
Indeed, year-to-year gains were reported in most construction spending areas, led by:
- communication (increasing by 18.5 percent to $21.8 billion);
- office (increasing by 15.7 percent to $73.3 billion);
- commercial (increasing by 10.9 percent);
- amusement and recreation (increasing by 9.2 percent);
- lodging (increasing by 8.3 percent);
- power (increasing by 4.9 percent);
- public safety (increasing by 2.5 percent); and
- educational (increasing by one percent).
Of the eight sectors to decline in March, sewage and waste disposal experienced the most-significant reduction, falling 22.3 percent from last year to $19.2 billion. Overall, public-sector spending saw a 6.5 percent decrease—but private spending jumped 6.4 percent.
“Although nonresidential construction spending fell on a monthly basis in March, it remains a largely positive indicator,” said Basu. “February’s nonresidential construction spending value of $717 billion … is the highest total since the Census Bureau began tracking the indicator.”
Employment numbers echoed this trend, with 3200 of the 5000 new industry jobs recorded since April being in the nonresidential construction sector. In March, 8500 more jobs followed. Overall, unemployment has decreased by 2.1 percent to land at 6.3 percent. However, Basu warns this may not be a purely good thing.
“The good news is that lower unemployment implies a tighter labor market, which in turn translates into faster wage growth. However, the lower unemployment rate also means that construction firms will have to work harder to fill available job openings and likely pay more for the workers they hire,” said Basu. “The most-likely scenario is that the U.S. economy will continue to expand in 2017, that jobs will continue to be created, and that interest rates will rise, but not by enough to completely undermine current housing market or commercial construction momentum, or the momentum in the broader economy.”
“It seems that the industry has overcome a weather-related slow start to the year, and we have some great numbers to show for it. The first quarter of 2017 has already demonstrated nonresidential spending levels at their highest in the history of that metric, and national unemployment is as low as it has been in the past decade,” said Joseph Natarelli, Marcum’s national construction industry group leader and partner-in-charge of its New Haven, Connecticut, office.
