The devastating effects of COVID-19 continue to impact job markets across the United States, most notably in the construction industry. As fears related to the pandemic remain, instability for contractors, subcontractors and trade professionals is front and center as they navigate the unknowns of the current climate.
COVID is not the only factor at play for ongoing construction decline. According to a recent study, the construction labor industry saw an increase in unemployment to 7% with much of the job loss attributed to severe winter weather. During February alone, there was a net loss of 61,000 jobs which spiked the unemployment rate to 9.6%. Harsh ice storms, deep snow and dozens of severe tropical storms affected states that rarely experience dramatic winter weather.
Concerns related to labor loss during the pandemic are bleeding into the materials market. After expensive labor shutdowns and the loss of regular transportation, thousands of suppliers are unable to access the tools they need to fulfill orders. Recent reports suggest at least 4% of contractors are missing or short of one or more vital materials. Almost 50% of the same subcontractors believe that the loss of important materials has been a top concern for project managers. This is nearly double the number of contractors who reported the same concern in the first quarter of 2021.
Wood, lumber and steel are the three most in-demand items experiencing a shortage, with wood leading the charge. In just 15 months, the loss of these materials has crippled contractor operations. As many as 94% of trade workers believe that this recent concern will impact their business significantly.
There are several factors influencing unemployment within contracting and subcontracting fields. The most important influences on the construction labor market include pandemic lockdowns, material costs and closing businesses. These extreme changes garnered the following unexpected results which point to future stabilization within the industry:
1.Building materials and labor costs shot upwards to accommodate raging inflation, poor distribution timelines, and a shortage of important materials. As fewer people purchased construction materials and focused on new solutions, shortages and supply chain distributions became a part of the new normal. These changing circumstances forced contractors to look for new ways of adapting their workflows.
2. The average mix of construction work stretched to accommodate new opportunities and job types with a major increase in the residential construction segment. Higher lumber and wood costs hiked prices for builders and gradually slowed the number of daily bids.
3. As fewer builders were able to operate on-site, contractors and subcontractors began to look for new ways to save on lost labor and manpower. The digital adoption rates of cutting-edge technology increased much faster than usual and spread around the country at record speeds.
4. Just in Time (JIT) distribution plans were replaced with more efficient timelines and better delivery options which ultimately improved construction schedules.
5. The demand for prefabricated or modularized homes skyrocketed as other materials became difficult to import.
6. Many smaller construction and contracting firms went out of business due to the industry’s financial squeeze. Because of this, less efficient and more debt-heavy companies gave way to streamlined, successful organizations.
Not all people weighing in on the construction labor issue are concerned for the future. BluSky Restoration Contractors, a firm that specializes in construction and remodeling after structural disasters, believes that labor loss is just a small bump in a flourishing industry.
“It’s not that there aren’t enough people to take jobs, it’s that there are more positions to fill than can be filled,” said Mike Erekson, a performance-driven COO at BluSky Restoration Contractors in a recent interview. “Millions of American construction professionals are no longer working or seeking employment, which is why these numbers still appear high from an outsider’s perspective. As unemployment benefits are truncated by Governors, and states continue to follow their reopening plans, we have no doubt that the industry will pick itself up again as we reach the fall and winter months.”
Other construction professionals weighing in on the issue concur. ABC Chief Economist Anirban Basu believes that labor unemployment numbers are worth keeping an eye on. “Despite a record number of available, unfilled jobs in America, the labor force participation rate actually dipped in May to 61.6%,” he said in an interview. “Coming into the pandemic, that level was 63.3%.”
Both contractors and subcontractors in the field remain confident about the return of the construction workforce. According to ABC’s Construction Confidence Index, many subcontractors expect to see sales, employment and various profit margins return to normal by the end of 2021. The project backlog the industry has experienced remains unchanged for both contractors and subcontractors and is not thought to decrease much over the next six months.
As of 2021, more than 79.8% of construction positions were restored to full-time status. This provided work for over 888,000 contractors who experienced job loss from previous companies, many of them permanent.
Construction spending is likely to be up compared with lower rates in 2020, with as much as a 1.3% increase year over year. As labor demand increases, so too will pay and benefits packages. According to studies completed by ABC Economists, pay for contractors and subcontracting laborers are more than 7.8% higher than earnings from privately held positions.
Contractors and subcontractors are set to become one of the most in-demand fields of 2021 and beyond. According to current research, as many as 430,000 new craft professionals will be needed to close the gap at the end of the year. As construction continues to reopen in a post-pandemic world, it is expected that every $1 billion spent in additional construction work will generate a new 5,700 construction jobs. This points to a climbing need for construction labor and subcontractors which will continue well into the future and correct the jobs deficit of the past year.