Tariffs and worker shortages prompting deferral, cancellation, shrinking of US projects

That’s according to the Associated General Contractors of America (AGC), which recorded a 0.1% dip in construction spending in July as compared to June.

Declines in private non-residential and multifamily construction offset increases in public outlays and single-family homebuilding, according to an analysis of government data by the AGC.

Association officials noted the results are consistent with its survey released last week that found many owners have cancelled, deferred, or scaled back projects due to tariffs and labour shortages.

Spending totalled $2.14 trillion at a seasonally adjusted annual rate in July. The total was nearly identical to the May rate, following an increase of 0.1% in June.

Private non-residential and multifamily projects slipped 0.5% and 0.4% respectively, from June to July. Manufacturing and private power construction each fell by 0.7%. Commercial construction dropped by 0.9%, and private office construction dipped by 0.2%.

Public construction outlays and single-family homebuilding rose 0.3% and 0.1%, respectively, from June to July. But the two largest public segments, highway and street construction and educational spending, each edged down by 0.1%.

Ken Simonson, the association’s chief economist, said, “Our survey of construction firms found 16% of contractors reported projects had been cancelled, postponed, or scaled back as owners’ demand or need changed due to tariffs while 45% of firms report project delays because of labour shortages. And 26% of firms said projects had been affected by changes in owners’ demand or need due to other policy changes such as federal funding, taxes, and regulations.”

The AGC called for greater policy certainty, including the quick resolution of trade disputes and an end to the threat of retaliatory tariffs.

They also urged the Trump administration to develop short- and long-term workforce development measures, including new pathways for people to enter the country and work in construction, as well as more investments in construction training and education.

“It is difficult for developers to launch new construction projects when they don’t know how much the project will cost or how long it will take to finish,” said Jeffrey D. Shoaf, the association’s chief executive officer. “Providing greater certainty on tariff rates and taking steps to address severe construction labour shortages will go a long way in stimulating new demand for construction.”