Sep. 25—A combination of uncertainty caused by higher tariffs and aggressive immigration moves has created a bleak picture for national and local construction prospects going forward, a national economist told a group of contractors Thursday in Spokane.
Ken Simonson, the chief economist for Associated General Contractors of America, delivered the remarks to the Inland Northwest Chapter of the AGC. He displayed a series of graphics that showed how construction employment has dropped as owners slow-walk projects while trying to navigate policy changes brought by the Trump administration.
“There is little that is going to make things positive for construction in the next year. The slides show a huge slowdown, and even a decline, in both construction employment and construction spending,” Simonson said. “And Washington state has been hit harder than almost any other state in terms of declining construction employment. I think that probably reflects how many types of projects have been put on hold or the lack of state money coming forward.”
One graph showed results of a survey indicating that about 89% of Evergreen state construction businesses had job openings, but only a few of those firms are choosing to fill jobs. In the Spokane metro area, construction jobs were down 7% since the beginning of the COVID-19 pandemic.
Hollis Barnett, president of Garco Construction’s federal and civil divisions, said he’s noticed that large projects around Spokane, such as high schools and major sewer improvements, have disappeared over the past couple of years.
“On the west side of the state, we are seeing mega-projects … but not a lot of the smaller-works projects in play,” he said. “The Washington state Department of Transportation had their funding significantly cut, so there are not many of those projects going on.”
On a solid note, Garco just last week won a bid for a major renovation of Fairchild Air Force Base’s mission support complex.
That $85.6 million project “is the largest we’ve ever had at Fairchild,” Barnette said. “So, that was a boost for the base.”
While the Fairchild project apparently has funding, Barnett said Garco has bid on several other federal jobs that are much less clear.
“The federal market has been a little more rewarding for us,” said Barnett, whose company employs more than 300 people. “But the challenge for us … is they may not be able to fund them.”
In the job advertisement, it states the scope of work and award date, but the documentation clearly states “they don’t currently have funding,” Hollis said. “So they ask us to put forth the effort to go after the project with the hope they are going to get the funding.”
While Garco continues large projects at Spokane International Airport and other locations, Hollis said some indications align with Simonson’s view that work is beginning to slow. He noted that the number of projects that go to architects and engineers has recently dropped off.
“That’s a good indicator of work to come. Looking over the next 12 months, that’s the challenge,” he said.
Workers aplenty
In 2022, union halls in the Seattle market were virtually empty of skilled workers, Hollis said.
“Now there are quite a few workers on the bench waiting to work. Now it’s pretty easy to get qualified labor,” he said. “That’s a good indicator that the market is not hot and there is not a whole lot of construction active.”
Simonson, the economist, said most areas of the country lost construction jobs at the beginning of the pandemic. But while the rest of the country rebounded and now shows 9% more construction jobs, Washington has 5% fewer of those jobs now than prior to the shutdowns.
Asked after the session what he saw as the cause of the construction slowdown, Simonson, who has worked as the trade group’s chief economist since 2001, put the blame squarely on changing federal government priorities.
“I think policy is the major explanation for why things have slowed down, particularly for construction,” he said.
He noted that many of President Donald Trump’s policy shifts remain unsettled either because of ongoing trade negotiations or court challenges to things like the president’s stated justification for placing higher tariffs to combat the influx of fentanyl.
“What you read on Truth Social may turn out to be truth partial when you get to the actual federal register notice,” Simonson said. “All of these things are making owners say, ‘Wait a minute. We can’t go ahead with the intended project until we know what the law and funding, and so forth, is actually going to be.’ “
Overall consumer spending continues to support the national economy, but Simonson said he fears the current situation could lead to economic stagnation.
“While there’s still positive figures on retail sales and on business investment, I think state and local governments are running into more and more fiscal problems. I think that investment will be very spotty,” he said. “So, I think we’re not hitting recession, but we’re getting close to it.”
Migrant labor
Whenever the government does anything to hinder migrant labor, it hurts construction, Simonson said.
“Construction is twice as dependent as the overall economy on foreign-born workers,” he said.
In Washington state, some 27% of workers are foreign born. But those numbers also depend on the trade.
For instance, about 61% of drywall workers and 54% of roofers are migrants, he said.
In a survey of construction companies, some 28% of firms nationally reported they had been directly affected by the immigration policies, Simonson said.
One-in-10 companies said workers had left the job or failed to appear because of rumored actions by U.S. Immigration and Customs Enforcement.
“Some 20% of firms nationally, and 25% in Washington, said that their subcontractors had lost workers,” he said. “If you’re losing workers, obviously your costs for overtime or replacing the workers, or getting the project finished — those costs would get much higher.”
Housing recovery
While most of his outlook showed problems going forward, Simonson said few bright spots remain.
Construction projects for power-hungry data centers, and utilities seeking to find the power to support them, remain robust, as do some medical-related facilities even though hospital construction has remained mostly flat.
While the numbers for multifamily homes had been down 20%, it rebounded to finish the year with only a 9% drop from 2024.
“So we’ve had a huge number of projects finished up over the last year or more and very few starts. But just last week we got positive information about multifamily starts,” he said.
The number of permits ticked upward. While that doesn’t mean developers will act on those permits, it could mean that they are poised for growth.
“I think we are close to hitting bottom on” multifamily construction, Simonson said. “It’s not going to be the boom times like we saw two years ago, but I think we will see improvement beginning by early next year.”
