Const. Spending, Employment Declines in May

July 6, 2021

Construction spending declined in May compared to the prior month, driven by continued drops in non-residential construction activity as firms struggle with supply chain disruptions, rising materials prices, and labor shortages, according to an analysis of new federal construction spending data. Officials with the association called on the Biden administration to remove tariffs on key construction materials, allow unemployment supplements to expire, and take steps to address supply chain backups.

Construction spending in May totaled $1.55 trillion at a seasonally adjusted annual rate, a decrease of 0.3 percent from April, but 7.5 percent higher than the pandemic-depressed rate in May 2020. The residential construction segment climbed 0.2 percent for the month and 28.2 percent year-over-year.

Private nonresidential construction spending fell 1.1 percent from April to May and 5.8 percent since May 2020, with year-over-year decreases in all 11 subsegments. Power construction fell 1.2 percent year-over-year and 1.6 percent from April to May. Commercial construction retreated 2.6 percent year-over-year and 0.7 percent for the month. Manufacturing construction fell 3.2 percent from a year earlier and 2.7 percent from April. 

Public construction spending dropped 8.7 percent year-over-year and 0.2 percent for the month. Among the largest segments, highway and street construction declined 4.3 percent from a year earlier, although spending rose 1.4 percent for the month. Public educational construction decreased 14.2 percent year-over-year and 1.9 percent in May. Spending on transportation facilities fell 10.4 percent over 12 months and 1.9 percent in May.

Construction employment also declined in 91 metro areas and was stagnant in another 24 between February 2020, the last month before the pandemic, and May 2021. 

Of the 91 metro areas with lower construction employment in May 2021 than in February 2020, Houston-The Woodlands-Sugar Land, Texas lost the most jobs: 30,500 or 13 percent. Major losses also occurred in New York City (-21,200 jobs, -13 percent); Midland, Texas (-9,600 jobs, -25 percent) and Odessa, Texas (-8,300 jobs, -40 percent). Odessa had the largest percentage decline, followed by Lake Charles, La. (-36 percent, -7,200 jobs); Midland; Laredo, Texas (-23 percent, -900 jobs) and Longview, Texas (-22 percent, -3,300 jobs). 

Construction employment increased in  243 metro areas compared to the February 2020 level—far fewer than the 320 metros that typically add construction jobs between February and May, Simonson noted. Minneapolis-St. Paul-Bloomington, Minn.-Wis. added the most construction jobs over 15 months (11,100 jobs, 14 percent), followed by Indianapolis-Carmel-Anderson, Ind. (10,900 jobs, 21 percent); Chicago-Naperville-Arlington Heights, Ill. (10,300 jobs, 9 percent); Seattle-Bellevue-Everett, Wash. (6,900 jobs, 7 percent); and Pittsburgh, Pa. (6,900 jobs, 12 percent). Fargo, N.D.-Minn. had the highest percentage increase (45 percent, 3,300 jobs), followed by Sierra Vista-Douglas, Ariz. (44 percent, 1,100 jobs); and Bay City, Mich. (36 percent, 400 jobs).