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Construction spending slumps in September

Midwest Stairs & Iron’s Collin Marak secures a balcony overhead on Oct. 19 at the site of the Freshwater Plaza in Milwaukee. Builders across the U.S. cut their spending on construction projects in September for the second straight month. (Staff photo by Kevin Harnack)

Midwest Stairs & Iron’s Collin Marak secures a balcony overhead on Oct. 19 at the site of the Freshwater Plaza in Milwaukee. Builders across the U.S. cut their spending on construction projects in September for the second straight month. (Staff photo by Kevin Harnack)

By Josh Boak
AP Economics Writer

WASHINGTON (AP) — U.S. builders cut their spending on construction projects in September, the second straight monthly decline. Much of the decrease came as government spending on schools, sewers and transportation projects tumbled — part of a broader yearlong decline as infrastructure spending has become a subject of much debate in the presidential election.

The Commerce Department reported Tuesday that total construction spending fell by 0.7 percent in September to a seasonally adjusted annual rate of $1.15 trillion. Publicly funded construction dropped by 0.9 percent to an annual rate of $270.3 billion. Over the past 12 months, government construction has slumped by 7.8 percent — a decline equal to nearly $23 billion.

Still, there was positive news in the report as construction spending for August and July were revised upward. This led many economists to increase their estimates of third-quarter growth from the annualized 2.9 percent reported recently by the government to 3 percent.

Both Hillary Clinton and Donald Trump have pledged to revive infrastructure spending if elected president. By reforming the business tax code, Clinton would provide an additional $250 billion in direct spending over five years and found a new infrastructure bank with $25 billion. Trump would rely on new tax credits for infrastructure. His campaign has projected an additional $1 trillion being spent over the course of 10 years.

The outlook for infrastructure spending has declined this year despite interest rates being near historic lows, making it cheaper for the government to borrow and investment in projects that can help long-term economic growth.

Between August and September, spending on school buildings fell 1.1 percent. Sewage and water project plunged 5.4 percent. Transportation spending fell 0.9 percent, and park-related building decreased 3.2 percent. Spending specifically on highways and roads did improve in September, although that figure has dropped over the past year.

Private construction spending, which makes up the bulk of expenditures, has been less of a drag. It slipped 0.2 percent in September as construction spending on factories, commercial spaces and utilities declined.

Gains in homebuilding offset some of this decrease. Residential construction spending has climbed 0.9 percent over the past 12 months to $453.7 billion, as low mortgage rates and a solid job market have increased demand for housing.

The news about construction spending came out a day after the Associated Builders and Contractors reported that the construction industry’s unemployment rate had decreased in Wisconsin and 31 other states in the 12-month period through September this year. The ABC, a group that mostly represents nonunion contractors, found Wisconsin’s rate was at 5.7 percent in September 2016, down 0.7 percent from the same month a year ago.

Still, the state’s rate was above the national average, which was 5.2 percent in September. That was the lowest average rate recorded since 2000, when the industry’s national unemployment rate was 4.6 percent.

The ABC calculates states’ construction unemployment rates by looking at Bureau of Labor Statistics showing the number of people who were last unemployed in the trades and are now looking for work.

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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