Construction faces headwinds from tariff uncertainty, immigration crackdown

The building sector comprised about 14% of aluminum consumption in 2024, according to government data. Extruded products outpaced sheet products within the building sector due to higher demand for window applications in 2022, according to Ducker Carlisle Construction, particularly in non-residential categories.

Planning ahead

After several months of little growth, the Dodge Momentum Index (DMI) rose in June to 225.1. That’s up 6.8% compared to a May reading of 211.1, which was revised downward. The June DMI is up 20% compared to a year ago.

The DMI is a monthly measure of the value of nonresidential building projects entering the planning stage. It has been shown to lead construction spending by a year.

Commercial planning grew 7.3% while institutional planning improved 5.7% month over month, according to Dodge. Compared to a year ago, the commercial segment was up 11% from June 2024, and the institutional segment was up 46% after a weak June last year.

“Nonresidential planning steadily improved in June, alongside strength in warehouse, recreational, and data center planning,” Sarah Martin, associate director of forecasting at Dodge Construction Network, said in a statement.

Martin noted that planning momentum in other sectors – like education, hotels, and retail stores – was more subdued.

“Expectations for weaker consumer spending and travel demand, as well as volatility around funding, are likely contributing to the weaker momentum of projects entering the planning queue for those sectors.”

A total of 40 projects, valued at $100 million or more, entered the planning phase throughout June.

To the bank

As for construction spending, let’s look back at the most recent data.

Construction spending totaled $2.14 trillion in May at a seasonally adjusted annual rate, down 0.3% month over month and down 3.5% year over year, according to the latest US Census data.

The year-over-year decrease was the largest since 2019, noted the Associated General Contractors of America, an Arlington, Va.-based trade group.

During the first five months of the year, spending clocked in at $841.5 billion, a 2.1% drop compared to a year ago.

In its second quarter report, Rider Levett Bucknall noted that construction-put-in-place declined in April, falling half a percentage point short of estimates. Also, architectural billings are down for the third consecutive month, potentially auguring a construction slowdown.

“Given the uncertainty about tariff policy, some businesses are waiting to invest in new infrastructure until the dust settles, and the path forward is clearer,” wrote Paul Brussow, president of Rider Levett Bucknall North America. “Higher education investment, in particular, has been hit hard.”

Employment

Construction firms are hiring. But it’s a challenging labor market, especially as immigration crackdowns have led to worksites being raided and employees afraid of reporting in, regardless of status, as noted by our sister publication Steel Market Update on June 26.

About 34% of construction craft workers are foreign born, according to Census data from 2023. 

Construction employment, seasonally adjusted, totaled 8.3 million in June, a gain of 15,000 month over month and up 121,000 year-over-year, according to an Association of General Contractors analysis of data from the Bureau of Labor Statistics.

But the number of job openings shrank year over year by 35% to 245,000 job openings at the end of May. The job openings rate (openings as a share of employment plus openings) fell to 2.9%, the lowest May rate since 2017, AGC noted.

“The steep declines in openings and hires suggest contractors have become more cautious about expanding as spending slows … or declines,” AGC stated. “The layoff rate (layoffs as a share of employment) edged up from 1.9% in May 2024 to a still-low 2.0%.”