The Preconomist

What did the July employment data tell us about construction labor? At first glance, the message appears contradictory. Construction employment reached a record 8.34 million workers in July. Yet year-over-year employment growth slowed to just 22,000 jobs , a fraction of the gains seen during the post-pandemic expansion. At the same time, average hourly earnings for construction workers increased 5.2% year-over-year , remaining well above the industry's long-term trend. In other words, construction employment remains at a record high, but hiring growth has slowed dramatically. Wage growth, however, remains elevated. That raises an important question. If hiring growth has slowed, why are wages still rising so quickly? The answer may have less to do with current hiring activity and more to do with the structural dynamics of the labor market. Recent multi-year union settlements continue to support wage growth across many trades. At the same time, specialized labor rema...

Real GDP grew 1.5 percent in the second quarter, down from 2.1 percent in the first, according to the advance estimate released by the Bureau of Economic Analysis. Investment continued to grow, driven by equipment and intellectual property products, but nonresidential structures investment declined for the tenth consecutive quarter. The headline number says the economy is still expanding. The composition of growth suggests a growing share of that investment is flowing somewhere other than new buildings. What did the headline GDP number show? Real GDP rose 1.5 percent in Q2, down from 2.1 percent in Q1. The deceleration reflected a downturn in government spending and slower growth in investment and exports, partly offset by an acceleration in consumer spending, according to BEA. What happened inside investment? The increase in investment primarily reflected increases in equipment and intellectual property products, partly offset by decreases in private inventory investment and non...

Two widely followed construction indicators softened in their latest readings, but the combined message is less about contraction and more about moderation. The Associated Builders and Contractors (ABC) Construction Backlog Indicator, which measures work already under contract, declined modestly in June. The AIA/Deltek Architecture Billings Index (ABI), a leading indicator of future construction activity, also reported a slight decline in architectural firm backlog during the second quarter. At first glance, that appears concerning. A closer look suggests the construction pipeline is cooling, not cracking. What did the ABC Backlog Indicator show? ABC's Construction Backlog Indicator fell to 8.8 months in June from 9.1 months in May. While backlog declined month-over-month, it remains slightly above year-ago levels and higher than any reading recorded between September 2023 and April 2026. Infrastructure remains the strongest segment at 10.1 months of backlog, followed by heav...

The Bureau of Labor Statistics released June 2026 Producer Price Index data this week. The headline for construction: nonresidential input costs decelerated to 7.1% y-y, down 130 basis points from May's 8.4% print. The chart below tracks two lines. One tracks wholesale resource costs; the other tracks final bid pricing. In June, outputs held at 3.5%. The spread between those two figures is 360 basis points. The gap is narrower than last month, but has not closed. What is driving the deceleration in inputs? America may run on Dunkin’, but construction runs on diesel. June's CPI report showed energy costs pulling headline inflation lower, and construction inputs followed. Diesel fell sharply in June, and fuel-sensitive categories moved with it. That is the cooldown visible in the chart, not a broad retreat in materials pricing. When energy leads a deceleration, relief is real but it is also the most reversible and volatile component of the index. Did anything move in ...

The tariff conversation in construction has mostly been reactive. A rate goes up, costs move, owners ask questions after the fact. What is unfolding right now is different. The administration is not oscillating on tariffs. Instead, it is rebuilding the legal architecture to make tariffs more durable. For construction budgets, that distinction matters more than any single rate announcement. What happened after the Supreme Court struck down the IEEPA tariffs in February? The administration moved fast. Within three weeks of the February ruling, USTR initiated 60 parallel Section 301 investigations into trading partners' failure to prohibit imports of goods produced with forced labor. A temporary 10% global tariff under Section 122 went into effect as a stopgap. Section 122 has a hard 150-day cap, expires around July 24, and was never intended to be permanent. Section 301 currently appears to be the administration's primary replacement mechanism. Congress delegated that autho...

Real construction spending fell across nearly every category in May. Total real spending is down 0.9 percent month over month and 5.4 percent year over year. What is worth watching is the one category that had been holding the broader numbers up, data centers have also turned negative on a monthly basis for the first time this cycle.   Where is the pullback concentrated? Virtually everywhere. Nonresidential is down 1.0 percent month over month and 7.6 percent year over year. Manufacturing is the worst category, down 2.4 percent month over month and 25 percent year over year. Office (ex-data centers) is down 1.2 percent month over month and 15 percent year over year. Commercial, warehouse, lodging, and both private and public education categories are also negative. Multifamily and infrastructure are also negative year over year, down 0.8 percent and 1.9 percent respectively, but far more modestly than the categories above. They are softening, not collapsing. What about data cent...

Domestic steel capacity utilization sits well below the 85% threshold that historically signals a constrained market. Yet structural steel fabricators are quoting 36-to-40-weeks from award to the start of erection. The gap has an explanation that matters for planning projects in 2027. What Do the Data Show? The Federal Reserve's capacity utilization rate for iron and steel products (CAPUTLG3311A2S) ran at 75.5% in May 2026 (seasonally adjusted). That is a solid operating level but not one that would typically generate extended lead times on its own. The American Iron and Steel Institute reports capability utilization at 80.2% for the week ending June 20, using a different but related methodology that runs 3-to-5 points above the Fed measure. Both series point in the same direction. The market is operating above its recent baseline but below levels associated with broad supply constraints. The import picture explains the gap between what the utilization rate suggests and what ...