Construction activity in Washington state is cooling as contractors face federal policy uncertainty, tighter funding, and workforce challenges, according to insights shared by national economist Ken Simonson and Spokane-based Garco Construction executives during a recent Associated General Contractors of America event.
Simonson, AGC’s chief economist since 2001, told members of the Inland Northwest Chapter that data shows Washington has been hit harder than most states, with construction employment falling sharply as project owners delay investments.
“There is little that is going to make things positive for construction in the next year,” Simonson said. “The slides show a huge slowdown, and even a decline, in both construction employment and construction spending. 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.”
Simonson presented graphics showing that while most of the country regained construction jobs lost during the COVID-19 pandemic — with employment nationally up 9% — Washington still has 5% fewer construction jobs than before shutdowns.
A survey highlighted that 89% of Washington construction companies reported job openings, but many are not filling them due to uncertainty. In Spokane, construction jobs are down 7% since early 2020.
Union halls that were once empty of skilled workers in Seattle now have “quite a few workers on the bench waiting to work,” said Garco Construction’s Hollis Barnett. “That’s a good indicator that the market is not hot and there is not a whole lot of construction active.”
Barnett, president of Garco’s federal and civil divisions, said large Spokane-area projects like high schools and sewer upgrades have largely disappeared.
“On the west side of the state, we are seeing mega-projects … but not a lot of the smaller-works projects in play,” Barnett noted. “The Washington state Department of Transportation had their funding significantly cut, so there are not many of those projects going on.”
One bright spot: Garco recently secured an $85.6 million renovation at Fairchild Air Force Base, its largest ever project at the site. “That was a boost for the base,” Barnett said, though he added that many other federal projects remain unfunded despite bid solicitations.
“The federal market has been a little more rewarding for us,” he said. “But the challenge for us … is they may not be able to fund them. So they ask us to put forth the effort to go after the project with the hope they are going to get the funding.”
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Simonson attributed much of the slowdown to unsettled federal trade and immigration policies under the Trump administration.
“I think policy is the major explanation for why things have slowed down, particularly for construction,” Simonson said. He noted that unsettled trade negotiations and tariffs — including those tied to fentanyl-related enforcement — have created confusion.
“What you read on Truth Social may turn out to be truth partial when you get to the actual federal register notice,” he remarked. “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.’ ”
Immigration policy is another major factor. “Construction is twice as dependent as the overall economy on foreign-born workers,” Simonson explained. In Washington, 27% of construction workers are foreign-born, including 61% of drywall workers and 54% of roofers.
Some 28% of firms nationally reported being directly affected by immigration enforcement, Simonson said. “Some 20% of firms nationally, and 25% in Washington, said that their subcontractors had lost workers. 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.”
Simonson cautioned that while consumer spending is still holding up the broader economy, state and local governments face fiscal challenges that could further restrict construction investment.
“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.”
Still, there are pockets of growth. Demand for data centers and related utilities remains strong, along with select healthcare projects. The multifamily sector has also shown tentative signs of recovery, with permits inching upward.
“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.”
Originally reported by Thomas Clouse in The Spokesman - Review.
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