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Construction Briefs AUG 2026
There were no construction briefs posted on June or July.
Construction Jobs vs Construction Spending.
Jobs growth has been ahead of business volume growth for more than 2 years. This is added jobs cost without added volume, adds to building cost inflation. When construction jobs increase more then volume of work, productivity declines. It takes more jobs to put-in-place the volume of work. By this measure, construction productivity has declined in 20 of of the last 25 months.
Data Center construction spending – 4 of last 5 qtrs average spending increases at a rate over 3%/mo. Next 12 mo spending forecast +2%/mo to +3%/mo.
Even if Data Center construction spending were to stall right now with no more gains for 2026, but level spending thru year-end, we would finish the year up $66bil, or up 33%.
I’m forecasting Data Centers spending will increase at a rate of 3%/mo for 8 of the 9 next months. DC will not post a decline in annual rate in the next 36 months. DC spending gains will overtake Mnfg declines in 2027.
When you read a post about data centers adding construction jobs, for every $1billion in construction it takes an average of 4000 jobs for one year. Ex., a $10 billion data center needs an avg 40,000 jobs for 1 yr, or more like 10,000 jobs for 4 yrs. Jobs start slow. Peak is higher than avg.
It takes approx 4,000 (to 5000) construction jobs one year to put-in-place $ 1 billion of building construction. $50bil of data center bldg construction (excluding all computing equipment) will require 200,000 man years (4000×50) to complete construction. That’s 10,000 jobs 20 yrs or 20,000 jobs 10yrs or …
” $170 billion of AI data-center capacity has been blocked, stalled or canceled since 2024″ WSJ
Manufacturing construction spending peaked at a rate of $250bil in Sep-Oct-Nov 2024. Spending has fallen in 15 of the last 19 months since peak, now at $175bil, and is expected to fall in 16 of next 18 months, down to $150bil. Manufacturing Construction Starts peaked in 2022. Starts are now only 40% of peak.
Changes to 2024 and 2025 Construction Spending issued July1. Little change to 2026 forecast but revs added $73bil to 2025 base, therefore all 2026 forecast percent growth went down. 2024 +55bil 2025 +73bil. Biggest revs to 2025 Rsdn +$14bil, Power +14b, Hlthcr +8b, DataCntr +8b Overall, biggest revs are to Data Centers, Mnfg and Healthcare
Construction Spending for 2026 is forecast at $2.217 trillion, down 1.2% from 2025. Inflation ranges between 4.3% (Nonres Bldgs) and 4.8% (Infra). Rsdn Inflation is at 4.4%. All sectors actual business volumes are being dragged down by inflation. 2026 Volume is forecast down 5.4%. A growing business must at least exceed added inflation.
If your total business revenues for 2026 increase less than 5.4%, your business is not growing.
for 2026, Data Centers gain +$20bil., Mnfg falls -$40bil.
If we use an avg of 4000 jobs per $1 bil spending per year, then DataCntr added 80,000 jobs while in Mnfg constr, -160,000 jobs ended. Office constr, 36,000 jobs ended. Highway constr 56,000 new jobs started.
Volume of construction work (spending minus inflation) has been falling for months, projected down 5.4% in 2026. We should see jobs follow, but jobs are up in 6 out of 7 mo so far in 2026, up a total of just under 1%. Volume is predicted to fall 10 of next 12 months. There is nothing in the data that would indicate volume is set to increase.
For 2026 nonresidential bldgs construction spending, Data Centers +40% +$20bil, Manufacturing -20% -$43bil. Nothing else even comes close to the impact these two have on overall spending, but also notice, a 40% gain in DC is not enough to offset a 20% decline in Mnfg.
Nonres spending in total is declining, in large part due to mega-spending on Mnfg Bldgs tapering to completion (spending peaked in Q3’24), creating large, but normal, annual declines. This may have the effect of offsetting gains in other nonres bldgs markets.
I posted this on my blog almost two years ago to explain the magnitude of the expected manufacturing construction spending taper decline. The decline from jobs ending is still greater than the growth from all added spending.
Construction should not be adding jobs now.
Construction PPI thru Jul
6.9% Inputs to Nonres Bldgs Constr
5.9% Inputs to Residential Constr
7.3% Inputs to Highway Constr
A few items Jul’26 vs Dec’25
67% Diesel
21% Aluminum Shapes
20% Steel Mill Products
11.7% Lumber/Plywood
10.5% Nonferrous Wire and Cable
9.3% Steel Pipe and Tube
The PPI Final Demand (actual price as built) for Nonres bldgs and contractors is 3.7%. Inputs gives us a look at material pricing only. Final Demand includes material, labor, productivity and contractors overhead and profit. Unlike mtrl inputs, most of the Final Demand increase occurred in Jun-Jul.
When updating all my files this month, couldn’t help but notice several government (and some private) issued inflation indices not updated or abandoned. Structural steel for bridges, IHS Power plant, Concrete pipe, Mortenson Nonres Bldgs, FHWA Highway
Construction Briefs May 2026
Construction Spending is now in for Jan, Feb and Mar. Spending is up 0.3% year-to-date (YTD) from 2025, but still 0.1% below the annual average 2025. The revised forecast for 2026 total construction spending is $2.225 trillion, expected to finish up 2.5% from 2025.
Forecast spending has increased slightly, almost entirely due to a March increase 3% above forecast for Single Family Residential. Residential renovations also added a sizable increase in March. Overall residential spending YTD thru March is 0.8% above Jan-Mar 2025, but it is still 1.6% below the annual average in 2025. The 2nd half of 2025 was much stronger than the 1st half, raising the 2025 average. Residential spending in 2026 is stronger midyear and is forecast to finish up 2.1% from 2025. However, after inflation, that is still a decline of 2%.
Nonresidential Bldgs spending is down 3.1% YTD from 2025 and down 3.4% from the annual average 2025. But spending improves throughout 2026 and is expected to wipe away any deficit and finish 2026 just equal to 2025. Keep in mind, with 4% inflation, that means real nonres bldgs construction volume declines in 2026, for the 2nd consecutive year. In fact, real nonres bldgs volume is currently down 10% from 2024.
Non-building Infrastructure spending is currently up 5% YTD and is forecast to finish 2026 up 7% from 2025. Strong gains in Power and Highway carry infrastructure to a positive forecast.
Notice in the table below, I carry inflation at about 4% in 2026. Actual inflation values are all final cost and are a composite of eight different sources, so the inflation carried in these reports will never be the highest or lowest. Predicted inflation reverts to historical averages with some influence of current conditions.
Taking 4% out of all the spending numbers above gives the Constant$ results or actual volume of business conducted. For 2025 business volume declined 4.6%. For 2026 it’s expected to decline about 1.7%. Only Non-bldg Infrastructure has posted real volume of business gains in 2025 and 2026. Spending is up, but volume of business is down.
Constant $ for all tables and plots in this report is inflation adjusted to mid 2024.
The rate of growth in construction spending for Data Centers averaged 3%+/mo for 36 months. Then for the last 6mo of 2025 it dropped back to <2%/mo. For 1st 3mo of 2026 it’s avg 2.8%/mo. Forecast avg for 2026 is 2.9%/mo.
As of March, DC spending is up 9% since Dec, up 22% from the Avg 2025.
Construction Spending for Jan, Feb and Mar is up 0.3% year-to-date (YTD) from 2025. After adjusting for inflation Constant$ volume is down 1% for the 1st 3 months 2026 vs 2025. Jobs thru April are up 1.5% YTD from 2025.
Although there may be a couple months in 2026 when construction jobs do increase, we should not expect overall construction jobs growth in 2026. We are in the 2nd yr of a constant$ volume decline. If jobs do increase, (jobs up-volume down) we are experiencing a productivity decline.
This plot shows the last time jobs and volume were in sync was Q2-2024.
Construction Briefs Jan 2026 Data Update 2-2-26
We are still not where we should be with actual data due to government data delays caused by the shutdown. Recent releases bring BLS jobs data up to Dec, PPI data through Nov and Construction Spending data through October. Here’s a collection of tables and plots reflecting some of that data through the end of January.
Construction Spending Value Put in Place
The November 2025 release, originally scheduled for January 2, 2026, and the December 2025 release, originally scheduled for February 2, 2026, for the Monthly Construction Spending report have been rescheduled for release on February 27, 2026.
There’s is an unusually large decline in residential construction spending in Sept data, almost entirely attributed to renovation work. A closer look at the data shows it may be that Aug and Oct reno data seem out-of-sync and those may be overstated. All 2025 data still open to Jul 1 revision.
25 data center projects were canceled in 2025 amidst surging local opposition — 4X as many as in 2024.
( Personal opinion – Data Center growth will be restricted by difficulty to ramp up power generation and transmission. This in turn will slow construction spending growth in this market).
Construction Jobs increased 1.1% in 2025. Spending (actual thru Oct) fell 1.5% in 2025. But inflation ate up 4% of spending. So real volume of construction activity fell 5.3%. Therefore, productivity fell 6.4%.
Also, if your construction business revenue increased less than 5.3% in 2025, your real business growth fell in 2025.
Jobs 2025 Nonres Bldgs +1.6%, Nonbldg +2.4%, Residential -0.6%
Construction Spending – Volume – Jobs
Construction Jobs avg 2025 increased only 88k from avg 2024. Slowest jobs growth since 2011 (ex 2020). Jobs 2025 up 1.1% over 2024. Jobs have been flat (or +/- slight) since Feb.
Residential jobs down 0.6%, but rsdn spending ytd thru Aug down 3.7% from Q4’24. After adjusting for inflation rsdn volume ytd is down 6%. Nonres Bldgs jobs up 1.6%. Nonres Bldgs volume down 3%. Nonbldg jobs up 2.4%. Nonbldg volume up 1.5%.
Environment for construction jobs looking difficult. Volume of work (spending minus inflation) available is declining all through 2026. Biggest declines by far, Manufacturing and SF Rsdn.
In the 10 months period Jan-Oct’25, construction volume declined by 4%. In the same period, construction jobs increased by 0.5%. And yet some economists are saying that job openings and hires indicate a labor shortage. Jobs should follow the amount of business volume.
Don’t expect construction to add jobs in 2026. While spending may be near flat, inflation data for 2026 has volume projected to fall 3.7%.
Construction Productivity
Construction spending constant $$ (volume) for 2025 is down 5.3% compared to start 2025 or same month 2024. I’m forecasting a decline of 3.7% in 2026. A 3.7% drop in volume could be a loss of 300,000 Jobs. Companies usually don’t cut # of jobs indicated by falling business volume. More jobs remain than volume. Productivity ($ pip per job) declines.
In 2026 real construction volume after inflation is expected down -3.7%. If we keep all current jobs, then volume put-in-place per job is lower, a decline in productivity of 3.7%. If we want to maintain the current level of productivity, we would need to lose 3.7% (300k) jobs. Unless the volume of work increases, I’d expect productivity to fall in 2026.
Volume of work is spending minus inflation. When jobs growth exceeds volume growth, productivity is declining. Volume has been declining for last 2 years and is expected to continue declining in 2026.
Inflation Index and Producer Price Index
If you track company revenues as business growth, without adjusting your business plan for inflation, you’re tracking register receipts, not business volume. Here’s a simple example to understand the difference in revenues (spending) vs volume. If a basket of apples 2yrs ago cost $25, but today the same basket cost $35, receipts increased 40%, but business volume has not changed.
Construction Briefs NOV 2025
After some delayed data released recently, we now have August Construction Spending and Sept Jobs.
In the past 12mo, Rsdn construction jobs fell 46k (-1.4%). Nonres Bldgs jobs increased 59k (+1.6%) and Nonbldg jobs increased 24k (+2.1%). Rsdn spending is down 5% (-$39bil) Nonres Bldgs is down 3.4% (-$25bil) Nonbldg is up 3.1% (+$15bil) Expect total spending in 2025 down 2.1%, jobs UP 1%
Construction Spending Forecast Total spending varies less than 1% from current through 2026 Jobs YTD up 16k. Only times job growth that slow was 2020 or recessions. 2011 through 2024, even with losses in 2020, avg jobs growth was 200k/yr. Don’t expect job openings (see JOLTS) in near future.
Environment for construction jobs looking difficult. Constant $ spending in 2026 is down just less than 1%. But Volume of work (spending minus inflation) available is down just over 4% and is declining all through 2026. Biggest declines by far, Manufacturing and SF Rsdn.
The decline in Manufacturing construction spending is due to having passed the peak in the scheduled project timelines for the large volume of mega-projects that started in 2021-22-23-24. (I wrote about it in more detail in Nov’24 in the article linked.) Peak spending is typically just past the midpoint of project construction. From Apr 2024 to Nov 2024, Mnfg spending averaged $240bil., the highest rate of spending on record. In 2025 it started the year at a rate of $$230bil but will end the year at $210bil. By the end of 2026 the rate of spending drops to $190bil.
The Manufacturing Spending Taper
My forecast has not changed much overall in the last few months. Residential has gained in revisions added to June and July and Aug posted a very strong 1.3% gain.
We will wait a little longer before we see any meaningful changes in construction materials input costs. September data (released 11-26-25) reported here. Also remember, PPI does not track imports, only domestic producers. Therefore, any implied increase in PPI being related to tariffs would be a domestic reaction to an import tariff. We can expect that.
INPUTS thru Sept up ~2% from avg2024. Final Demand for Nonres Bldgs is up 1.2% ytd vs avg 2024. However, Oct is the revision month for Q3 Final Demand data, so Final Demand data not finalized for Q3.
Forecasting in a Shutdown
10-7-25 It sure doesn’t help forecasters when we can’t get fresh data. So how can we forecast when there is no current data forthcoming?
One of the data sets that my forecasting models are set to calculate is annual forecast on smaller sets of data within the year. For example: The Total Spending SAAR average for the months of AMJJAS (Apr thru Sept) when extended for a full 12 months, predicts the annual spending within +/- 1%. This calculation has been within this 1% limit 22 times in 24 years (think Drake Maye accuracy here). The other 2 years were off by 1.1% and 2.2% (in 2020). And unfortunately, we don’t have August or September data.
The last actual data we have is July. For Nonresidential Bldgs, the average predicted from AMJJ (Apr thru July) predicted the annual total Nonres Bldgs spending within 1.8% 13 out of the last 14 years (2011 to 2024), with one year being 2.6%. The average of those 14 years is less than 1% off from the actual.
This is not a simple average. Each month produces a different share of annual spending. For ex: Based on 20-year averages, January and February each produce only about 7% of annual Nonres Bldgs spending while June and July produce each about 9% of annual spending. When a small set of data is used, the spending in each of those months is compared to the 20-yr average for those months and projected out to get 100% or a full 12 months of spending.
The small data set of AMJJ, when used to predict 2025 Nonres Bldgs spending, forecasts +/- 0.9% or $730bil to $756bil. The average predicts spending on Nonres Bldgs will hit $743bil. My current forecast, which includes actual data thru July and forecast to year end, predicts spending will hit $749bil.
Residential spending, based on small data set is between $882bil and $920bil., with the average predicting $901bil. My current forecast with all actual data from Jan thru July and forecast thru year end is $892bil.
The best small data set predictor is having data for AMJJAS. This predicts total spending will come in between $2109bil and $2149bil, with the average for the year at $2133bil. My current forecast predicts spending for 2025 will total $2140bil.
Generally, I look at these small data set calculations to insure I haven’t made some kind of blunder in my forecast. In this case, the small data set gives some comfort level that the annual forecast, although based on only 7 months of actual data, may not be very far off from what to expect at year end.
Construction Briefs Sept 2025
The headline construction data is the year-to-date (ytd) comparison. Through July data, ytd2025 is -2.2% compared to ytd2024. But where is it headed. Watch for this. Last year spending was increasing until it peaked in October. This year spending is falling and will continue to fall into Q3. Every month now the ytd spread gets worse, because 2025 is decreasing and 2024 was increasing. It’s significant in residential which is currently thru July down YTD 4.0% and is forecast to finish 2025 down 5.2%.
Construction Spending is down 7 out of the last 9mo, now down -3.5% or an inflation adjusted total -6.5% since October. Over that period spending is down most significantly in Residential. Residential spending peaked in October 2024. Since then it’s down 10% ($90bil). Warehouse is down -12% ($8bil). Manufacturing is down only 6% but that is $15bil. Manufacturing is experiencing the tail end of a huge volume of work that peaked also in Oct., 2024. It is expected to continue on a slowly declining spending slope for at least the next year. Spending is up the most now in Data Centers, on track to gain 32% (+$10bil) in 2025 and 31% ($13bil) in 2026.
When spending is up by just a little it looks like we are making progress. But we are always fighting inflation. If spending is up by 3% but inflation is 4%, then real business volume declined by 1%. If spending is down 5%, with 3% to 4% inflation, business volume is down 8% to 9%.
Overall, business is declining. The current data in the table below indicates constant$ spending, or business volume, drops for the next three years.
Do not overlook the impact of inflation. Residential spending for 2025 may end down only 5.2% but spending includes inflation of 4.7%. When real residential volume is compared to real volume in 2024 we find that residential volume of business declined 9.1% in 2025. This happened also in 2023, then not since 2009, when it fell 24%. Let that sink in! Residential business volume in 2025 is forecast down almost 10% ($85bil). Since the most recent peak spending in 2022, residential volume is down almost 15%, (~$150bil).
Since 2011, (excluding recession yrs) construction jobs thru Aug increased on average by 150,000 over the 8mo. For 2025, jobs thru Jul increased only 6,000, the slowest jobs growth (ex recessions) in 50 years. Residential construction jobs peaked in Sep’24. Spending was near the May peak from August to December. Since then, spending has been falling and will continue to fall. Rsdn jobs have fallen 7 out of the last 10 months. Rsdn jobs are down 1% ytd. Nonresidential and Nonbuilding jobs are both increasing slightly. The outlook for 2025 has construction jobs falling by 40,000. Jobs are expected to fall even more in 2026.
While many of the construction cost items in the PPI are tame so far, there are a few that have outsized gains. PPI YTD thru Aug vs the 2024 avg Conc Pipe +6.2%, Lumber/Plywd +4.4%, Fab Str Steel +3.5%, Nonferrous wire +7.2%, Alum Shapes +12%, Diesel -10.3%.
Final Demand pricing for Nonres Bldgs holding down at 2% or lower. Construction Analytics inflation rate for 2025, which includes inputs from eight sources, is 4.4%.
Remember, the PPI does not track imports or tariffs.
Construction Briefs Aug 2025
The biggest story in construction data right now is jobs.
Average construction jobs growth through July, last 25 years, excluding recessions, +130,000.
Average construction jobs growth through July, last 10 years, excluding recessions, +140,000.
2025 Construction Jobs growth through July, +21,000.
Not so surprising, as the Constant $ construction spending through July is down -5.7%, (compared to same months previous year), steepest decline since 2011, which was the end of the great recession. Constant $ (inflation adjusted) construction spending is now back to early 2022 level.
Construction Spending is down 5 of the last 6mo, now down a total -3.0% from Dec. Over that period spending is down most significantly in Residential, Manufacturing and Commercial w/o Warehouse. It’s up the most in Data Centers, Highway and Public Utilities. Overall, business is declining.
Construction Spending inflation adjusted is forecast to drop slightly every month for the rest of the year. Expect constant $ spending at year end down -6.3% from 2024. Uncertainty over tariffs and funding subsidies has slowed decision making on planning and moving new projects forward to construction. This is not an environment to expect jobs growth.
If jobs were to move at the same rate as business volume, with 2025 construction spending in constant$ expected to fall -6.3%, then jobs would be expected to fall -6.3%. That’s 500,000 jobs. The only times we’ve ever lost 500,000 jobs in a year was in both 2009 and 2010. In those years, after falling 17% in the previous 3 years, business volume dropped another 12% and 10% respectively.
Residential construction jobs peaked last September and are now down 1% or 35,000 jobs since then. In Constant $, residential spending is down 10% since last September. Jobs never move at the same rate as spending. This has a significant impact on productivity.
Data Centers are the bright spot in construction spending, up 17% since December and forecast to finish the year up 30%, an increase of +$10bil.
Biggest forecast declines in Current$ construction spending: Residential -5.8% (by far largest $ decline, -$55bil); Manufacturing – 6.5%, -$15bil; Warehouse -10%, -$7bil; Office (ex Data Centers) -10%, -$7bil; Comm Retail (ex Warehouse) -8%, -$6bil.
Manufacturing spending is now receding from an astronomical high. From 2019 through 2021 spending was averaging $80bil/yr. In 2024 it reached an average of $235bil, and peaked in Oct at $244bil. In June it was only $223bil and it’s expected forecast for 2025 is down -6.5% from 2024, but that is still a very high $220bil.
Construction Briefs July 2025
Construction Spending is down in each of last 5mo, now down a total -2.4% from Dec. Biggest declines are Warehouse -7.7%, Commercial w/o Wrhse -4.6%, Office w/o Data Centers -4.3%, Residential -4.2%, Transportation -3.7% and Manufacturing -3.5%.
Residential posted the biggest $ rate drop, -$40bil SAAR since Dec.
Data Centers are up 9% in 5mo, but last year DC were up 56%, increasing 15% in the 4th qtr alone. The rate of growth has slowed from near 4%/mo in the 2nd half 2024 to less than 2%/mo in the 1st 5mo 2025.
With this issue of May Construction Spending, Census revised all data back through 2023. Total spending was revised UP $52bil in 2023 and $39bil in 2024. Due to the increase in 2024, all percent growth in 2025 is slightly lower. The largest revisions up in 2024 were Residential +$11bil, Educational +$8bil and Power +$8bil. Also, in 2023, Power was revised up +$17bil and Manufacturing +$9bil.
Office vacancy rates are very high, near 20%, and in some places, like San Francisco, about double that. It’s hard to see that office construction will increase anytime soon. Office construction spending has declined every month for the last 10 months and is down 10% compared to the same 5mo 2024.
Construction Briefs June 2025
Construction Spending Explained
- New Starts + Existing Backlog generate Spending
- Spending = Revenue
- Revenue includes inflation which adds nothing to volume
- Revenue – Inflation = Business Volume
Construction spending fell slightly in April, down 0.4% from March. Spending has fallen slightly each of the last 3 months, but total spending is still at/near an all-time high with the seasonal rate at $2,200 billion. The forecast predicts spending will increase to 3% growth by year end.
Construction Forecast Update – Data Centers shows the largest % growth for 2025, forecast +33%. Manufacturing is still the largest $ contributor ($223bil/yr) to nonresidential bldgs total spending ($772bil/yr), but has fallen 6% in the last 5 months.
Peak manufacturing construction spending was posted from Sep thru Dec 2024. The avg of 1st 4mo of 2025 is down 4% from that peak. By Q4’25, avg spending will be down 10% from peak.
BTW, this is totally normal. We are beginning the tail end of an above normal huge influx of new manufacturing projects that started over the last 3 years, and the spending curve is beginning the downhill slope. Spending will continue to fall for the next 3yrs.
Data Center construction spending has not yet hit peak. Data Centers are continuing on a phenomenal streak of +45% growth in 2023 and +56% in 2024 and now 33% in 2025. The avg of 1st 4mo of 2025 is up 39% from same 4mo 2024. Spending will finish the year almost 20% higher than today. 2025 forecast +33% over 2024. Currently projecting peak spending end of 2027, or later.
Headwinds could slow new starts growth. Many economists predict current trade impacts will slow overall economic growth. That in turn could slow capital expenditures, which, in this case, is new construction starts.
Any capex pause could reduce all Data Center numbers. However, starts are up 400% since 2020 and could finish 2025 up 500%. Would take a lot of canceling or delaying to collapse these numbers. (This is going to first appear in construction starts, “firms pausing or delaying capex.” It’s already started with Data Center).
What’s propping up construction spending growth? Here’s the top growth markets.
- Market——1yr/%/$ growth ——3yr growth
- Educational 1yr/+8%/+$10bil +3yr/+30%/+$30bil
- Data Centers +56%/+$10bil +286%/+$18bil
- Public Utilities +11%/+$9bil +58%/+$38bil
- Power +10%/+$14bil +24%/+$29bil
- Highway +4%/+$6bil +40%/+$40bil
Data Centers far and away takes the prize for highest % growth, but Data Centers is only 1.7% of all construction spending. Power is 7%, Highway is 6.6%, Educ is 6.3%, Pub Util is 4.4%
Manufacturing is notably absent from the above list, because after 3 outstanding years, Mnfg is no longer contributing growth. Mnfg spending is beginning to taper off. Mnfg is 9.3% of construction spending. The only market over the last year, or 2 or 3 years, with more $ spending than Manufacturing is Residential.
Mnfg 1yr/+20%/+$39bil 3yr/+284%/+$150bil
Mnfg 2025 forecast -10%/-$24bil
What’s holding spending growth back?
6-17-25 When May construction starts are reported later this month, I’m expecting an overall decline and a lower forecast. There are already reports of pauses in manufacturing facilities and data centers. Hiway and Public Utilities are probably immune from cuts but Power may see some reductions. Education and Healthcare are questions. Residential construction expected down slightly. Housing permits continued a downhill trend in April for the fourth month in a row. KB and Lennar report market pricing is down slightly. # of homes on the market is increasing.
This next plot shows the number of workers required to put-in-place $1 billion of construction in 1 year. Except for Nonbldg Infra, which has remained relatively flat over time, it requires more jobs to put-in-place $1bil today than it did 10 years or 20 years ago. Total construction workforce (8,300,000) divided by # of billions$ put-in-place (2,200 billions$/yr) is the simplest way to show the decline in construction productivity. Results here broken out for major sectors.
Construction Jobs Total hours worked peaked in March, now down 0.4%. For May, jobs increased by 4,000 (<0.1%), but unemployment dropped from 5.6% to 3.5% (175,000). That would mean that 171,000 workers dropped out of the workforce.
Steel Tariffs 50%
50% of nonres bldgs are structural steel. Str Stl is 10% of total bldg final cost. Nonres bldgs construction spending = $770bil/yr., $385bil on SS nonres bldgs., $38.5bil on str stl
Struct Steel material is only 25% of steel total contract cost, so 38.5 x 25% = only $9.6 bil is mtrl used in SS nonres bldgs. So at 50% tariff = $4.8bil added cost to nonres bldgs total spending. (This assumes ALL steel increases in cost).
Above is structural steel only. When including all other steel used in a building, (rebar, studs, frames, etc), steel is 15% of total bldg cost. So added cost would be $7.7bil.
And that is just nonres bldgs. MF Rsdn uses a little steel, but Nonbldg markets, Power, Highway, Transport, Pub Util adds about another $5bil.
So, steel tariffs, IF ALL STEEL WERE TO INCREASE, adds inflation to total Nonres Bldgs and Nonbldg. Half of all Nonres Bldgs use structural steel, so inflation to SS bldgs is 4.8/385, or 1.25% on structural steel bldgs. If looking at the macro view, inflation over the nonres bldg sector, then the $4.8bil increase would be divided by the total nonres spending, or 4.8/770 = 0.625%. All other bldg steel, applied to all nonres bldgs, added another 2.9/770 = 0.4%
Nonbldg Infrastructure markets, if it is a SS building, add the same 1.25% + 0.4%. But Public Works and especially Bridge construction can add significantly more. If domestic producers also raise pricing to follow suit with tariffs, as expected, this is what happens to total Nonres inflation.
US imports 30% of steel it uses. 40% of all steel is used in construction. If 30% is balanced across all types of steel, then 30% of constr steel is imported. (It would take some concentrated effort to determine % imports for each of the individual steel uses.) IF ONLY IMPORTED STEEL WERE TO INCREASE and no domestic manufacturers raise prices, 30% of building steel increases in cost. That is not likely at all. But if so, tariffs would add only 0.4% to nonres bldgs and about 0.1% for all other steel.
Construction Forecast Update May 2025
The total construction spending forecast, now at $2,237bil, +3.7% vs. 2024, has been lowered a bit since the Outlook in Feb. ($2,272bil, +5.5%). Most of the reduction is in Residential, from $997bil, +7.2% down to $958bil, +3.0%. Nonres Bldgs was reduced by $11bil and Nonbldg increased by $7bil. Compared to the average for the year 2024, current total spending YTD is up 2.6%, but is expected to pick a little up throughout the year across all sectors.
Constant $ growth is forecast down 0.7% in 2025 and down more after that. Inflation Index shows annual percent and index to base 2024 = 100. All years, current spending / index = reported as constant 2024$, as if all constant years are the same 2024$.
Residential Single Family spending has been in a range +/- 2.5% for the last 7 months. With only a few months lower than that, this range extends back 18 months. Take out 3%/yr inflation and you can see that SF volume has been flat to down. Multi-family spending, for the last 12 months, is down 15% off recent highs in Q1’24. Reno/repair spending extended recent highs across 5 months in mid 2024, before falling off 10% in Q4, and now, in Q1’25 it has gained back most of that drop. Any spending gains in the near future would be driven by multi-family.
Manufacturing is still the largest $ contributor ($222bil/yr) to nonresidential bldgs total spending ($772bil/yr), but has fallen 6% in the last 5 months. The trend is down in most months for 2025 and down in 2026. This decline is entirely expected and you can read about it in my article, The Manufacturing Taper.
Data Centers shows the largest % spending growth for 2025, forecast +39%, continuing on a phenomenal streak of +45% in 2023 and +56% in 2024. Data Center starts increased 300% over the previous 3 yrs. and still increase in 2025 and 2026, but at a slower rate of growth. Manufacturing spending peaked in Oct’24. Data Center spending continues to increase for the next few years. Both of these forecasts take into account some cancelations or delays announced recently (see May Briefs), however do not account for any major stoppages due to recent trade impacts.
The largest $ increases in spending are Power, forecast to increase +$16bil, and Highway +$13bil. Educational spending is forecast to post the largest nonres bldgs $ growth in 2025 (+$12bil, +9%). Data Centers increase $10bil.
This same scenario that looks to occur in Manufacturing will occur also in Highway/Bridge. Normal starts were about $100bil/yr, with slow growth. But for the last 3 years, actual starts totaled closer to $500bil for the 3 years or $167bil/yr. This strong growth in starts is expected to continue at least into 2025, totaling near $650bil for 4 years. Again, consider that part of that is inflation, but the remainder is government investment growth. So a decline from the taper back to normal for Highway/Bridge may not show up at least for the next few years. But once the taper begins it will have the same effect on Nonbldg Infrastructure spending that we will see from Mnfg in Nonres Bldgs.
Typical jobs growth is 2.5% to 3.5% per year, even though spending can sometimes far outpace that. But jobs growth doesn’t track spending, it tracks volume growth. Volume is spending minus inflation. For example, for the 4 years 2021 thru 2024, spending increased 44%. But inflation increased 33%. Volume growth was only 11%. Jobs increased 12.5%. For 2025, Inflation will outpace spending growth by 1%, but jobs are still expected to increase by 1.5%. Rarely do jobs decrease. That could change.
There are 870K construction jobs in TX. 500K are immigrants and 300K are undocumented.
New starts are forecast up in 2025, but I would caution there are a lot of headwinds that could slow new starts growth. Many economists predict the current trade impacts will slow overall economic growth. That in turn could slow capital expenditures, which, in this case, is new construction starts. So far year-to-date, spending is outpacing new starts growth. That means backlog is decreasing, mostly in nonresidential buildings. We haven’t seen a decrease in Nonres Bldgs backlog since pre-2011. Residential backlog is down slightly. Nonbuilding is increasing.
See Also Construction Briefs May 2025
and Construction Briefs Apr 2025
5-15-25 all ppi DATA UPDATED TO APR See Construction Inflation 2025
I’ve increased the inflation outlook since Feb to a range of 4.5% to 5%. Inflation may be the most uncertain of all factors affecting construction this year. We have yet to see any significant impact from tariffs, and there is sure to be impacts to many construction inputs. We may not know the total impact for several more months. But I would expect, if anything, inflation will go up from here, not down.
The bees are swarming the flowers outside. At least some lifeform is content and at peace with this world.
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