Carney: April Construction Spending Disappointed Because Public Safety Building Crashed Under Biden

U.S. construction spending rose by only a modest two-tenths of a percentage point in April, missing expectations for a half a point gain.

A big drag on construction this month was the unexpected decline in public sector spending, which is less subject to the whims of the market. Usually, when the government—whether its the federal government, a state, or a city—has decided its going to build something, the money gets spent regardless of the prevailing market conditions that might deter private construction.

There’s an important exception to that rule: when a category of government construction is politically charged and control of the government changes hands.

The data from the Census Bureau show that government spending on a category called “public safety” fell 15.2 percent in April compared with the prior month. It is down by nearly 25 percent since January. That is the biggest monthly decline ever recorded.

So what is “public safety” construction? It includes prisons, jails, police stations, fire stations, sheriffs’ offices, and detention cells. Not court houses, though. The census bureau says those count as offices.

And—most importantly—it includes The Wall.

Spending on walls or fences along the southern border of the U.S. is counted as public safety spending, according to a spokesperson for the Census Bureau.

If you look at the chart on monthly public safety spending, you see a huge increase in 2019 followed by another big leap in 2020, after Trump had secured a deal that allowed for more spending on construction of The Wall. Spending then remains high through the end of the Trump administration. In January, public safety construction spending was just over $16.1 billion.

And then it falls off a cliff once Biden takes over. In April, it had fallen to just under $12 billion.

There’s no way to tell how much of this exactly is Wall funding. A good deal of it is also likely other border security funding, such as housing units for detained migrants. In any case, it is now way down under Biden.

This decline explains all of the miss. If public safety construction spending had remained at the January level, overall spending would have hit the consensus estimate.

Note, however, that public safety spending remains much higher than it was for most of the previous decade. That likely means that this category will continue to decline in the months ahead.