Supply chain bottlenecks, materials prices still causing issues

Construction employment declined for the third time in the past four months in May as nonresidential contractors coped with lengthening and unpredictable delivery times that limited their ability to start or complete projects, according to an Associated General Contractors of America (AGC)  analysis of government data.

Association officials say many contractors report they are having a hard time finding qualified workers to hire, as some people remain reluctant to return to work while their children are learning from home, or they are collecting elevated unemployment supplements.

“Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many nonresidential contractors,” says Ken Simonson, the association’s chief economist. “If they can’t get the materials, they can’t put employees to work.”

Seasonally adjusted construction employment in May totaled about 7.4 million, a drop of 20,000 from the downwardly revised April total. Industry employment declined as well in April and February. The total in May remained 225,000 less than in February 2020 – the high point before the pandemic drove construction employment down by more than 1 million jobs.

According to AGC, the gap widened in May between residential construction, which has experienced feverish demand for new and remodeled housing, and nonresidential construction, which has been declining, aside from a few niches.

Residential construction firms – contractors working on new housing, additions and remodeling – gained 1,900 employees during the month and employed 35,000 more workers (1.2 percent) in May than in the pre-pandemic peak month of February 2020. In contrast, the nonresidential sector – comprising nonresidential building, specialty trades and heavy and civil engineering contractors – shed 21,800 jobs in May and employed 260,000 fewer workers or 5.6 percent less than in February 2020.

“Contractors are being told they must wait nearly a year to receive shipments of steel and four to six months for roofing materials,” Simonson says. “These delays make it impossible to start some projects and to complete others, leaving contractors unable to keep workers employed. In addition, soaring prices for steel, lumber and other materials are deterring owners from committing to going ahead with projects.”

Association officials urge Congress and the Biden administration to take steps to address the record materials price increases and supply chain bottlenecks. AGC says the president should end tariffs on key materials such as lumber, steel and aluminum. They add that Washington officials should look at ways to ease manufacturing and shipping backups, and they urge Congress to allow unemployment supplements to expire, as planned, after Labor Day.

“The decline in construction employment is likely less about a lack of demand as it is about the challenges contractors are facing in meeting that demand,” says Stephen Sandherr, the association’s CEO. “Supply-chain problems and labor shortages are holding back what should otherwise be a much stronger recovery for the construction sector.”