Slowing Nonresidential Construction

10/27/2020

Recent statements by leading construction industry economists point out that despite adding 26,000 new jobs in September, construction appears to be slowing.

Anirban Basu, chief economist for the Associated Builders and Contractors says that anecdotal evidence indicates that new projects are becoming scarce. “The economic recovery that began in May is losing momentum, as Congress has failed to pass another stimulus bill to offset the continued impacts of the pandemic on travel, tourism, energy production and many other industries,” he said. “With many states still suffering high positivity rates and the economy not fully reopening, combined with the uncertainties of an especially contentious presidential election, elevated financial market volatility, and looming winter weather, the near-term outlook will continue to deteriorate absent further stimulus.” Read the full analysis.

An analysis by the Associated General Contractors of America of government data indicated that the pandemic was prompting strong demand for new housing as more Americans work from home, while undermining private-sector development of office, retail, and other types of projects and forcing many local and state governments to cut construction budgets.

“Construction is becoming steadily more split between a robust residential component and generally stagnant private nonresidential and public construction activity,” said Ken Simonson, the association’s chief economist, noting that in the three months since June, residential construction employment has increased nearly 3 percent while nonresidential employment has slipped 0.2 percent. “As project cancellations mount, so too will job losses on the nonresidential side unless the federal government provides funding for infrastructure and relief for contractors.”

A likely reason for the more pessimistic outlook, according to Simonson, is the rapid increase in postponed or canceled projects. He noted that the latest AGC survey found 60 percent of firms reporting a scheduled project has been postponed or canceled as a result of the pandemic, compared to 12 percent that had won new or additional work.