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Labor Shortages and Political Gridlock that is Depressing Public-Sector Investments are Holding Back Broader Growth for the Construction Sector, Officials Urge New Workforce & Infrastructure Measures

Construction spending in May was unchanged from April but increased from a year ago amid growing reports that contractors are struggling to find enough skilled workers to keep projects on schedule, according to an analysis of new government data by the Associated General Contractors of America. Association officials said a mixture of worker shortages and political gridlock appear to be holding back construction sector growth.

“Spending on most types of private construction has remained relatively flat from month to month so far in 2017 but at a higher level than in the same period of 2016,” said Ken Simonson, the association's chief economist. “In contrast, public investment in infrastructure has generally declined from last year’s levels despite a pickup from April to May. At this point in the year, it looks as if private demand for structures remains healthy, but gridlock in Congress and in several state governments will depress public infrastructure spending.”

Construction spending in May totaled $1.230 trillion at a seasonally adjusted annual rate, unchanged from the upwardly revised April total, Simonson said. He added that the year-to-date increase of 6.1 percent for January through May 2017, compared with the same months of 2016, shows overall demand for construction remains positive but that the recent flattening of investment coincides with more frequent reports that contractors and home builders are stretching out completion times because they cannot find enough qualified workers.

Private nonresidential spending slipped 0.7 percent for the month but grew 5.3 percent year-to-date. The largest private nonresidential segment in May was power construction (including oil and gas field and pipeline projects), which edged up 0.3 percent for the month and 3.4 percent year-to-date. The next-largest segment, commercial (retail, warehouse and farm) construction, decreased 1.0 percent in May but climbed 15.2 percent year-to-date. Manufacturing construction declined 1.7 percent for the month and 7.8 percent year-to-date. Private office construction increased by 0.8 percent for the month and 16.9 percent year-to-date.

Private residential construction spending slipped by 0.6 percent between April and May 2017 but gained 12.4 percent year-to-date. Spending on multifamily residential construction dropped 3.3 percent for the month and was up 6.2 percent year-to-date, while single-family inched down 0.3 percent from April to May and was up 7.3 percent year-to-date.

Public construction spending grew 2.1 percent from the prior month but declined by 3.5 percent for the first five months of 2017 combined. The biggest public segment—highway and street construction—dipped 0.9 percent for the month and 1.3 percent year-to-date. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction inched down 0.2 percent year-to-date; spending on sewage and waste disposal plummeted 21.5 percent; and spending on water supply fell 11.0 percent.

Association officials urged Washington officials to act on new measures to support workforce development – such as passing new legislation to support career and technical education – and to find a way to pay for needed investments in aging public infrastructure. “Washington officials must enact measures to support career and technical education and to get our aging roads, bridges and water systems back to a state of good repair,” said Stephen E. Sandherr, the association’s chief executive officer.