Economic factors that will play a role in 2022

Dodge Construction Network projects a
6 percent increase in highway and bridge starts this year. Photo: Alexandr Muşuc/iStock / Getty Images Plus/Getty Images

While outlining what the construction industry can expect from different sectors in the years to come during a recent event, Dodge Construction Network provided a look at the economic factors driving its 2022 projections.

Employment, infrastructure funding and the supply chain are the elements that had the most impact in 2021, according to economists at Dodge and Moody’s Analytics. Issues with these should either be corrected this year or remain on their current course.

Following a year when countless job openings went unfilled and supply struggles forced many throughout the industry to drastically change their plans, Dodge provided hope for a turnaround in 2022.

“Regardless of the challenges, I think we need to be aware that within these challenges, there are opportunities to get a step above the competition,” says Richard Branch, Dodge’s chief economist.

Employment

One key improvement Cris deRitis, deputy chief economist at Moody’s Analytics, expects in 2022 is a return to full employment.

As of August 2021, deRitis says there were 10.4 million job openings, with 7.7 million people unemployed (not working or actively seeking work).

While deRitis says factors such as the pandemic, child care needs and Baby Boomers retiring early played contributing roles, he does not expect these to be issues beyond 2022.

“By the end of [2022], we expect that the economy will have recovered all of the jobs we lost during the pandemic, as well as jobs that we should have been creating just due to population growth as people graduated from high school and college,” says deRitis, who shared insights during Dodge’s Construction Industry Outlook event late last year. “By the end of 2022, our baseline forecast calls us to be back at full employment. Basically, anyone who wants a job can get a job.”

According to Branch, labor shortages are nothing new to the construction industry. During the Dodge event, he said there were just under 350,000 jobs openings in the construction sector.

“It should be no surprise that there is an acute shortage of skilled construction labor in the sector and that job openings are on the rise,” he says. “That has been on the rise since the darkest months of the pandemic back in early 2020. If we look at this over a longer period of time, labor shortages are not a new phenomenon in the construction industry.”

Says Dodge Construction Network’s Richard Branch: “From an operating perspective, plants are very slowly getting back to normal. We’re still dealing with trucking issues, we’re dealing with port issues.” Photo: adamkaz/E+/Getty Images

Infrastructure funding

While the funding worked into the Infrastructure Investment & Jobs Act (IIJA) was a welcome development for the industry in November, one hurdle remains early into 2022: disbursement of the funds.

Still, Branch projects a 6 percent increase in highway and bridge starts this year. Had the bill not passed, he says no 2022 growth in highways and bridges would take place.

According to Dodge, total nonbuilding is projected to increase 32.5 percent through 2026. Without the IIJA, growth would have been less than half of that projection – at only 14.9 percent.

“Everyone agrees we need to do more spending on our roads and bridges, our airports and even our ports,” deRitis says.

Supply chain

Heading into 2022, manufacturing delays on equipment continued to cause setbacks. Pricing also continued to rise.

deRitis says inflation has gone up anywhere from 4 percent to just below 5 percent, driving prices even higher.

“This is really due to the supply chain effect and that we’re reopening the economy in short order,” deRitis says. “What we have is all this pent-up demand from folks for goods and services [and] a lot of spending that couldn’t be done during the lockdown period. Now that we’re reopening the economy, everyone is trying to go through the door at the same time. There’s just not enough supply to go around and, therefore, you have limited supply and lots of demand that is sending prices upward.”

deRitis, however, believes supply chain order should be restored by the middle of this year.

“We will see more and more businesses expanding and adding more supply to alleviate the supply chain effects that we see,” deRitis says. “That should lead to more goods being available, and that should take some of the pressure off the prices.”

Still, Branch is not sure whether rising costs will be resolved this year.

“From an operating perspective, plants are very slowly getting back to normal,” he says. “We’re still dealing with trucking issues, we’re dealing with port issues. I think the inflation we’re dealing with here in the construction sector, as it relates to materials and prices, is probably going to last into midyear before we start to see prices pull back.

“But, even as those prices start to pull back or the inflation slows in the back half of 2022, that level of prices should remain fairly high,” Branch adds. “At least through the end of [this] year.”