Construction spending inched up 0.1 percent from July to August, but was 5.3 percent higher during the first eight months of 2018, according to an Oct. 1 analysis of new government data by the Associated General Contractors of America. The AGC said there were continued year-to-date gains for both major public and private projects.
"Nearly all categories of construction spending continued to expand through August," said Ken Simonson, the association's chief economist. "Furthermore, growth is well-balanced among public, private nonresidential and residential projects. But contractors are increasingly worried about a shortage of skilled workers."
Also, comparing construction for the first eight months of the past two years, construction spending was also strong, up 7 percent in 2018 vs. 2017.
Most major segments have had gains in 2018. The largest public categories recorded year-to-date gains of 6.4 percent for highway construction, 1.0 percent for educational construction and 15.9 percent for transportation construction. In the residential area, single-family homebuilding rose 7.9 percent year-to-date, multifamily slipped by 0.7 percent and improvements to existing buildings climbed 6.9 percent.
Among private nonresidential spending niches, the largest—power construction - edged up 1.1 percent, commercial construction rose 4.6 percent, and office construction increased 6.5 percent. Manufacturing construction declined 5.5 percent.
"In a survey of more than 2,500 firms that our association released recently, respondents overwhelmingly say they plan to add employees in the next 12 months—a strong indicator of ongoing demand for construction," Simonson added. "However, 80 percent of the firms report difficulty filling hourly craft positions. These labor shortages are prompting many firms to increase costs and delay construction schedules."
Meanwhile, the Dodge Momentum Index dropped 2.6 percent in September to 159.5 (2000=100) from the revised August reading of 163.7. The Momentum Index is a monthly measure of the first report for nonresidential building projects in planning. Both components of the Momentum Index were lower in September; the commercial component fell 4.3 percent, while institutional lost 0.1 percent. The Momentum Index has now fallen for two consecutive months; however, due to a very strong reading in
"The Momentum Index may seem to have lost some impetus, but this can be attributed to outsized gains in the late spring and summer," Dodge said. "In fact, the Momentum Index is now returning to a more sustainable level of activity given the overall age of the current construction cycle."
There was also good news in the nation's employment situation, both in construction an elsewhere.
The Bureau of Labor Statistics reported that the U.S. jobless rate dropped to 3.7 percent in September — the lowest since 1969 - and this happened even though the economy added a lower-than-expected 134,000 jobs that month. The jobless rate in August was 3.9 percent. The economy has now added jobs for nearly eight straight years.
Construction employment has continued a hot streak, adding 23,000 jobs in September and 315,000 jobs over the past year, reaching a 10-year high. Conversely, the construction industry's unemployment rate decreased more than half-a-percentage point to 4.1 percent from a year earlier. That's according to BLS data analyzed by the AGC.
The figures showed that construction employment totaled 7.28 million in September, the highest level since May 2008 and a gain of 4.5 percent over the past 12 months. Employment in residential construction – comprising residential building and specialty trade contractors—grew by 4,400 jobs for the month and 139,600 jobs over the past 12 months, a 5.2 percent increase. Employment in nonresidential construction—including building, specialty trades, and heavy and civil engineering construction—grew by 18,600 jobs in September and 176,300 jobs during the past year, a 4.1 percent increase.