Varied Monthly Results among Segments, along with Year-over-Year Gains, Suggest Demand for Projects Remains Strong but Spending May Have Been Slowed by Shortage of Qualified Construction Workers
Total construction spending dipped from February to March with declines in private nonresidential and residential projects that offset a rebound in public construction, according to an analysis of a new government report that the Associated General Contractors of America released today. Association officials noted, however, that contractors continue to report robust backlogs and few cancellations, suggesting that the slowdown in spending may be due to a lack of workers, not slumping demand.
“Private nonresidential categories showed varied patterns, while multifamily construction continued to slip from record levels in 2023,” said Ken Simonson, the association’s chief economist. “Meanwhile, public construction posted healthy gains for the month and year-over-year. These diverse trends suggest there is still strong demand for projects, but a dearth of workers may be forcing a slowdown in spending.”
Construction spending, not adjusted for inflation, totaled $2.084 trillion at a seasonally adjusted annual rate in March. That figure is 0.2 percent below the downwardly revised February rate, but 9.6 percent above the March 2023 level.
Spending on private nonresidential and residential projects both declined in March but rose year-over-year. Nonresidential construction slipped 0.2 percent for the month but rose 11.1 percent from March 2023. The largest private segment, manufacturing construction, climbed 0.1 percent and 25.8 percent, respectively. Commercial construction fell 0.6 percent in March but ticked up 1.3 percent over 12 months. Investment in power, oil, and gas projects slumped 0.9 percent in March but rose 6.0 percent year-over-year. Spending on private residential construction fell 0.7 percent for the month but grew 4.4 percent year-over-year. Single-family construction fell 0.2 percent after 10 monthly gains in a row but rose 18.3 percent year-over-year. Multifamily spending fell 0.6 percent in March but climbed 3.5 percent from March 2023.
Public construction spending increased 0.8 percent for the month and 17.9 percent from a year earlier. The largest public segment, highway and street construction, climbed by 0.9 percent in March and 19.9 percent over 12 months. Public educational spending rose 1.0 percent and 16.7 percent, respectively.
Association officials said the strong gains in public construction were good for the industry and the economy, but they also noted that worker shortages are likely making for longer project completion times and holding down monthly spending on private projects. They urged federal, state, and local officials to hike funding for construction education and training programs to enable more people to acquire skills needed for construction careers. And they continued to push federal officials for measures to allow more people to lawfully enter the country and work in construction.
“Continuing economic growth requires investments in infrastructure, manufacturing, and energy projects,” said Jeffrey D. Shoaf, the association’s chief executive officer. “Investing in new construction education and training programs and enacting some common-sense immigration reforms is essential for ensuring the nation has enough workers with the skills to build these and other vitally needed projects.”