In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses construction spending.
- Construction activity rose modestly in January despite the terrible wintry weather conditions. The value of new construction completed was 9.3 percent above one year ago, marking the fastest 12-month gain in nearly 8 years. More construction is needed to relieve the housing inventory shortage, raise commercial real estate business opportunities, and bring good jobs into local communities.
- There appears to be a sizable pent-up labor demand for construction workers. Spending has risen by 25 percent over the past three years. Yet, construction employment of builders and general contractors has increased by only 9 percent. If employment had followed proportionately with the dollars spent on construction then there would be about 850,000 additional workers in the construction sector. So far more job creation is occurring in residential construction (up 9 percent from one year ago) than in commercial real estate construction (up 3 percent).
- Construction spending by government has been falling over the past four years. Fortunately, the cutbacks have not occurred in spending on highways and streets. After a brutal winter, additional fresh money will surely be required to upgrade America’s roads and bridges.
- It is worth recalling that America’s highways were purposely built in the 1950s as an emergency route out of major cities in case of nuclear bomb attack. The traffic jams of today means there will not be a fast getaway. However, the interstate road system does provide us with the everyday pleasures of visiting family and friends in far-away places. Even visiting a college campus where a loved one had studied can bring certain pleasant feelings. The author was immensely happy to have walked around Randolph-Macon College in Lynchburg, Virginia, where Pearl Buck did her studies before heading over to China. Her experience turned into a novel – “The Good Earth” – showing the value everyday people place on land. She won a Nobel Prize in literature for it. It’s a good tie-in to the REALTORS® preamble, which begins with “Under all is the land.”