WASHINGTON (AP) — A sharp drop in commercial building projects caused a slight decline in construction spending in January. But the dip comes after previous figures were revised much higher.

Construction spending edged down 0.1 percent in January, the Commerce Department reported Thursday. That is the first drop since July. It follows a 1.4 percent increase in December and a big rise of 1.9 percent in November. November's figure was revised up from 0.4 percent.

Construction of factories, hotels and power plants all fell sharply, pushing down nonresidential construction by the most in a year. Government construction spending also fell.

Spending on residential construction rose 1.8 percent, driven by a big gain in single-family home building.

Overall construction spending dipped to a seasonally adjusted annual rate of $827 billion, down slightly from December.

Despite the recent gains, the spending pace is only 8.5 percent above the post-recession low and nearly 32 percent below the peak reached during the housing boom.

There have been signs that the housing market is slowly improving. Builders are increasingly optimistic because they are seeing more people express interest in buying a home.

Sales of previously occupied homes in January reached their highest level since May 2010, one month after a federal tax credit expired. And more Americans signed contracts last month to buy homes in January, which suggests completes sales will continue to increase.

Contract signings typically indicate where the housing market is headed. There's a one- to two-month lag between a signed contract and a completed deal.

Sales of new homes rose four straight months at the end of last year before dipping in January. And more new homes and apartments are being built.

Still, housing's recovery is coming from very depressed levels and economists caution that it is a long way from a full recovery. Despite a pickup at the end of last year, the construction of homes and apartments fell 1.4 percent in 2011, the sixth straight year of decline.

A stronger job market has helped boost the industry this year.

The economy has added an average of 200,000 jobs in the past three months. The unemployment rate has fallen for five straight months, to 8.3 percent. And the number of laid-off workers seeking unemployment benefits is at the lowest point in four years. That's a sign the job market will likely continue to improve, economists say.