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Construction Spending Inches Up, But Employment Declines

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Construction employment fell in May by 28,000, the largest decline in two years, and is now at the lowest level since last August, according to an analysis of new federal data recently released by the Associated General Contractors of America. The drop in construction employment comes as new figures show a 1.4% decrease in public construction spending restrained overall construction activity growth to 0.3%.

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“With construction employment shrinking for the fourth month in a row, the industry is clearly having a difficult start to the year,” said Ken Simonson, the association’s chief economist. “In particular, cuts to public-sector investments in construction are taking their toll, given that heavy and civil engineering construction experienced the largest employment decline within the sector.”

Total construction employment now stands at 5.5 million, or 0.5% lower than a month earlier but 18,000 higher (0.3%) than in May 2011, the economist said. Meanwhile the industry’s unemployment rate is at 14.2%, nearly double the national average. He added that overall construction employment is still far below its peak level of 7.73 million in April 2006.

The nonresidential construction sector lost 17,400 construction jobs in May, Simonson noted. Heavy and civil engineering construction firms – which perform a large share of publicly funded construction work – shed 11,200 jobs while nonresidential specialty trade contractors lost another 7,700. Nonresidential building contractors added 1,500 for the month. Residential construction lost 11,000 total jobs as the residential specialty trade contractors shed 10,000 jobs and residential builders lost 1,000 positions in May.

Meanwhile, construction spending in April increased by 0.3% compared to March 2012 and 6.8% compared with April 2011 and is now at an annualized rate of $820.7 billion. Private-sector demand for construction expanded by 1.2% for the month and 12.5% year-over-year, but overall growth was held back by a 1.4% monthly decline in public construction activity and a 3.2% drop from the April 2011 level.

Association officials said the new construction employment and spending figures underscore the need for quick Congressional action on a number of long-term infrastructure measures, including reauthorizing clean water and surface transportation programs. They said members of Congress participating in a conference committee negotiating what could possibly be a new highway and transportation bill should feel a new sense of urgency given the grim construction employment figures.

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