More contractors report canceled projects than starts

More contractors say they’re experiencing postponed or canceled construction projects these days. Photo: iStock.com/Jens_Lambert_Photography

Construction firms are experiencing widespread project deferrals and cancellations, along with disruptions to ongoing work and few new project awards, the Associated General Contractors of America (AGC) reports.

In addition, the economic damage from the pandemic is dragging down industry employment in metro areas across the nation, according to an AGC survey and an analysis of government data.

“The survey results make it clear that the months-long pandemic is undermining demand for projects, disrupting vital supply chains and clouding the industry’s outlook,” says Ken Simonson, AGC’s chief economist. “Without new federal relief measures, these challenges pose a significant threat to current construction employment levels.”

Simonson notes that three-quarters of AGC survey respondents report having a scheduled project postponed or canceled. He says that figure is up from the 60 percent of contractors who reported a canceled project in AGC’s August survey and the 32 percent who did so in June.

Meanwhile, only 23 percent of contractors report working on new or expanded construction projects as a result of the pandemic – about the same percentage as in June, AGC says.

Other impacts

The coronavirus is also disrupting projects that are still underway, Simonson notes. Seventy-eight percent of respondents report they are currently experiencing project delays or disruptions – up from 57 percent in June. In particular, 42 percent of firms are experiencing disruptions due to a shortage of construction materials, equipment or parts.

Also, 35 percent of survey respondents are experiencing disruptions because of a shortage of craftworkers and/or subcontractors. Only 7 percent of firms are experiencing disruptions because of a shortage of personal protective equipment.

Shrinking demand and disrupted operations are shaking contractors’ faith in the future, AGC says. Thirty-four percent of survey respondents report they do not expect their firm’s volume of business will return to pre-pandemic levels for at least a year.

Delays, disruptions and uncertainty threaten to undermine employment levels in the construction sector, AGC adds. In fact, 30 percent of firms report they have already furloughed or terminated employees because of the coronavirus.

Employment data

That is likely why construction employment fell during the past year in most metro areas, Simonson says. Construction employment fell in 234, or 65 percent, of 358 metro areas between September 2019 and September 2020. Construction employment was stagnant in 38 other metro areas, and only 86 metro areas added construction jobs over the past year.

According to Simonson, the majority of firms plan to cut jobs or abstain from adding new employees during the coming year. Twenty percent expect their headcount will shrink while 42 percent say they do not plan to add to the size of their headcount during the next 12 months.

Most firms participating in the AGC survey (78 percent) cite a preference for new federal relief measures to mitigate against the impacts of the coronavirus. Among the measures firms are hoping Washington officials will enact are new federal investments in infrastructure, liability reforms that protect responsible firms from frivolous coronavirus suits, and a new highway and transportation bill.

“As our survey shows, the pandemic and efforts to mitigate its spread have deeply wounded the economy, depressing demand for many types of commercial construction projects,” says Stephen Sandherr, AGC’s CEO. “Congress can end the downward economic slide and help create needed new construction jobs by passing measures to boost demand and protect honest employers.”