How is the Construction Industry Doing?

Curtis Dubay, Senior Economist, U.S. Chamber of Commerce

Construction spending in total is now above where it was pre-pandemic, but it took until November 2020 for it to reach that level. Bad weather throughout the country caused a pullback in February. When March data comes out, it should show an increase with improved weather conditions and strong overall spending caused by the improving economy and latest round of stimulus payments.
 
By the numbers: Underlying the relatively strong overall numbers is the significant fragmentation in the industry. For instance, according to the Census Bureau, overall construction spending in 2020 was almost 5% higher than in 2019. Residential construction was up over 12%. Public safety spending was up a whopping 43%. And water supply spending up 17%. On the flipside, lodging construction was down almost 14%, religious almost 11%, amusements and recreation about 7%, and manufacturing more than 10%.
 
The jobs data reflects this fragmentation. Construction overall has lost 173,000 jobs since February 2020. But residential construction employment has risen more than 31,000. Residential specialty trade contractors are up 33,000. Nonresidential building is down more than 31,000, heavy and civil engineering construction has lost 36,000, and nonresidential specialty trade contractors are down 170,000, accounting for almost all the job loss in the industry.
 
Looking ahead: As the end of the pandemic is in sight, the construction industry as a whole should improve. The strength of the residential market is likely to continue, especially if interest rates remain low. Commercial construction should improve, like many of those industries that have been on the bottom of the k-shaped recovery. Overall strong economic conditions will boost commercial spending, as will delayed projects, and a resumption of work in office spaces rather than at home.