California Construction Sector Newsletter | JM Construction
Mark Marshall — President, JM Construction
Edition No. 28 | Thursday, July 2, 2026
Coverage window: June 25 – July 2, 2026
Highlights from the Past 7 Days
Two significant releases landed in a 24-hour window, and a batch of new California statutes took effect July 1. The half-year mark gives us a clean read: construction spending is flat, private nonresidential is in a sustained decline, and California’s cost index just broke out of a five-month plateau.
Building Permits, Starts and Spending
Construction spending (May data, released July 1): Total construction spending in May ran at a seasonally adjusted annual rate of $2,210.2 billion — 0.1% above the revised April estimate of $2,207.1 billion, and 1.5% below the May 2025 estimate of $2,244.4 billion. Residential spending rose 0.4% while nonresidential was flat. Within nonresidential, declines in manufacturing (−1.4%), power (−0.2%) and commercial (−0.3%) offset gains in office (0.2%), educational (0.3%) and highway and street (0.6%). U.S. Census BureauTRADING ECONOMICS
The private nonresidential picture is worse than the headline: Nonresidential construction spending fell 3.8% over the twelve months through May, per ABC’s analysis. Private nonresidential slipped 0.3% month over month and is down 6.6% over twelve months — the seventh consecutive monthly decline, which ABC chief economist Anirban Basu attributes largely to falling manufacturing-related construction. Warehouse spending, which appeared to stabilize at the start of 2026, has now fallen for three straight months and is down 8.5% year over year, and the general office category is down 11.9% since May 2025. Construction Dive
Public work is the offset. AGC’s Ken Simonson called highway construction one of the strongest segments of the market, with infrastructure investment offsetting weakness in several private segments. AGC is urging Congress and the White House to pass a new highway and transportation bill before the current law expires September 30. That September 30 date belongs on our calendar. Construction Dive
Material Cost Trends
The California index broke its plateau. DGS posted the June California Construction Cost Index at 10396, up from 10188 in May — after readings of 10159 (January), 10159 (February), 10124 (March) and 10135 (April). That is roughly +2.0% in a single month, and about +2.0% against June 2025’s 10195. Five months of nothing, then a step change. Whether that’s a one-month artifact of the ENR building cost inputs or the start of a trend is the question for July’s print. caca
Underlying drivers (May PPI detail, most recent available): Construction materials prices jumped 2.6% in May and were up nearly 10% year over year. Aluminum mill shapes rose 48.8% year over year, copper and brass mill shapes 26.8%, and steel mill products 6.7%. Copper wire and cable was up 24.2%. Simonson tied a 19.9% monthly and 105.9% annual increase in the diesel PPI to the Middle East conflict, which is feeding trucking costs and the delivery fuel surcharges many contractors now pay. Engineering News-Record
Labor Trends
June jobs report (released this morning, July 2): Total nonfarm payrolls rose 57,000 and the unemployment rate was 4.2%. Employment showed little or no change in construction, along with most other major industries. The 57,000 figure came in well below the 110,000 economists had forecast, and April and May employment together was revised down by 74,000 jobs. ABC’s read of the same data puts construction at 11,000 net jobs added in June and 64,000 over the past twelve months — a 0.8% annual increase, with nonresidential doing virtually all the lifting. U.S. Bureau of Labor Statistics + 2
For California specifically, the state-level breakout doesn’t publish until later in the month, but our last four state readings have all been negative and worst-in-nation. Assume no relief until proven otherwise.
New California Laws Effective July 1
- SB 79 launched the Transit-Oriented Housing Development program, preempting local zoning on density, height, parking minimums and use restrictions for qualifying housing projects near major transit stations across eight Bay Area and Southern California counties, with an affordability component required to access the override. Bay Legal PC
- SB 779 raised the minimum fine for unlicensed work to $1,500, and set minimums of $1,500 for the most serious violations and $500 for most other license law violations. The Press Democrat
Action: run a CSLB status check on every sub currently on our jobs and every sub on our bid list. The downside is now materially larger.
Bottom Line
- Private commercial work is not coming back this year. Seven straight months of decline in private nonresidential, with office and warehouse leading down. Weight our pipeline accordingly.
- Public and infrastructure work is where the momentum is — and it has a September 30 legislative cliff attached to it.
- Reprice on the new CCCI. A 2% single-month move justifies revisiting any estimate carried at April or May escalation assumptions.
- Verify sub licensing. SB 779 is live.
Sources
U.S. Census Bureau, Monthly Construction Spending, May 2026 (July 1, 2026) · ENR, “Construction Spending Inches Up Slightly in May” · Construction Dive / ABC, “Private Construction Spending Slid in May” · U.S. Bureau of Labor Statistics, The Employment Situation — June 2026 (July 2, 2026) · Fox Business and CNBC coverage of the June jobs report · ABC Ohio Valley analysis of June BLS data · California DGS, California Construction Cost Index, June 2026 · ENR, “Construction Materials Prices Jump 2.6% in May” · Bay Legal PC and Press Democrat summaries of 2026 California construction legislation
Informational only. Consult your financial, legal and insurance advisors before making company-specific decisions.