One of those economists—Anirban Basu, chief economist for Associated Builders and Contractors—used the forum to explain an anomaly in the improving economy: nonresidential construction. Despite favorable market conditions, such as low interest rates, a boom in domestic energy production, and improving housing figures, nonresidential construction remains flat.
Basu explains that the sectors of the economy that are experiencing the strong growth make up the smallest sectors of nonresidential construction. And vice-versa: The largest sectors of nonresidential construction aren't recovering at all.
Now see how those sectors are faring in the recovery:
Further, some of the effects are more localized than others. The transportation sector comprises a relatively small number of large projects: the O'Hare Modernization Program, the Dulles Corridor Metrorail Project, and high-speed rail in California, to name a few projects under way or about to begin. Elsewhere, public spending is flat—and to a large extent, public spending determines nonresidential construction.
The effect on national construction employment is clear enough, so long as one understands that, by and large, the Specialty Trade Contractors sector comprises residential home builders, Basu says. These contractors are finding two-thirds of the new construction jobs, and the work is heavily tilted toward residential construction—consistent with an economy in which residential and remodeling spending is driving the recovery in construction.
The stubborn slow growth (or, not even growth) in nonresidential construction is simple to describe: The categories of nonresidential-construction spending showing improvement are small, while the categories declining are relatively huge. What turns it around is harder to say.
"Sequestration is just a taste of things to come," Basu says.