Nonresidential construction spending increased by 1.9% in April to $1.05 trillion, reports the U.S. Census Bureau. The increase comes despite several headwinds looming over the industry, such as economic and workforce concerns, states Anirban Basu, chief economist of Associated Builders and Contractors (ABC).
Census Bureau data shows that 13 of the 16 nonresidential subcategories increased, including manufacturing, lodging and commercial. This increase in nonresidential construction spending coincides with early 2023 growth in the glass and glazing industry, states Nick St. Denis, Key Media & Research’s director of research. He says that nonresidential glass and glazing activity is up year-over-year, which is slightly higher than anticipated.
“As uncertainty hangs over much of the U.S. economy, the nonresidential construction sector is still chugging along,” says St. Denis. “Volume of demand continues to show strength, and improved pricing is helping drive these large year-over-year increases. Residential construction is contracting, but as far as U.S. glazing contractors are concerned, growth in nonresidential is doing more than enough to offset impacts from a decline in multifamily.”
Let the Money Flow
Basu says that money continues to flow into the U.S. nonresidential construction segment despite higher interest rates, prominent bank failures, a near-miss debt ceiling crisis and pervasive fears of recession.
He adds that while 2023 appears to be a solid year for growth for nonresidential construction, 2024 remains uncertain.
That’s because growing weakness in consumer spending, tightening credit conditions, lag effects associated with prior Federal Reserve rate increases and uncertainty stemming from high-stakes elections could eventually catch up to the broader economy and certain construction segments.
Nonresidential Construction Employment Grows
According to Basu, contractors continue to struggle with labor shortages, even though U.S. Bureau of Labor Statistics data shows that the nonresidential building segment led all construction sectors in workers hired in April and May 2023.
The labor department reports that nonresidential construction employment expanded by 22,100 positions on net in May, while nonresidential specialty trade and nonresidential building added 7,200 and 4,200 jobs, respectively. As a result, the construction unemployment rate dropped to 3.5% in May.
Labor department officials add that the construction industry added 25,000 jobs on net in May. Year-over-year, employment in the industry has increased by 192,000 jobs, an increase of 2.5%.
“Momentum is especially apparent in the nation’s nonresidential construction segment,” says Basu. “The construction industry unemployment rate is now below the economywide unemployment rate, and plenty of available, unfilled construction jobs exist. Among the principal takeaways is that there will continue to be substantial upward pressure on construction worker compensation during the months ahead.”
