Dive Brief:
- New data shows that U.S. contractors are growing more optimistic, mostly driven by a rise in revenue expectations. They also have better outlooks on hiring as business concerns related to the coronavirus pandemic lessen, according to the latest U.S. Chamber of Commerce Commercial Construction Index.
- In the first quarter of this year, 36% of contractors said they expect their revenue to increase over the next year, a jump of 11% from the last quarter of 2020. Eighty-seven percent expect their revenue to either stay the same or increase, up from 86% last quarter. Most (86%) contractors also reported a moderate to high level of confidence that the U.S. market will provide enough new business in the next year.
- In addition, close to half (46%) of contractors said they will employ more people in the next six months, up from 37% in Q4 2020. The same percentage (46%) expect to keep the same number of workers, and just 3% expect to reduce their staffing, down from 12% in Q4 2020.
Dive Insight:
Despite the positive news, the index remains 12 points below its score of 74 from Q1 2020 before the COVID-19 outbreak and it found that contractors' top concerns are related to the ongoing effects of the pandemic. They include worker health and safety, more project shutdowns, fewer projects and less availability of building products.
"As vaccines continue to roll out, contractors are expecting to hire more workers and anticipating good times ahead. The industry still has a way to go to return to pre-pandemic levels, but rising optimism in the commercial construction industry is a positive sign for the broader economy," said U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley in a press release.
Alongside the positive signs of recovery come workforce challenges, the report said. These include difficulty finding skilled workers, material shortages and cost fluctuations. Of those experiencing the impact of cost fluctuations, 43% said wood/lumber is the product of most concern, followed by steel (35%) and copper (27%).
"Finding skilled workers was a critical issue before the pandemic, and while it has remained a chronic problem over the last year, heightened concern may be emerging again as contractors look to hire," Bradley said.
Additional findings show:
- Tariff and trade concerns are up. More contractors say steel and aluminum tariffs will have a high to very high degree of impact on their business in the next three years.
- More contractors plan to increase spending on tools and equipment, increasing to 37% from 28% in Q2 2020. Before the pandemic (Q1 2020), 54% said they planned to increase spending.
- A majority (80%) of contractors are still experiencing delays due to COVID-19, with an average share of 23% of their projects delayed, but that share is expected to drop to 15% looking ahead six months.
Another analysis released earlier this month backs up concerns over an increasing shortage of skilled labor. The 2020 Marcum JOLTS Analysis found that construction employees are becoming harder to find.
In addition, as contractors in some regions struggle to find labor, wages have risen to record levels. In January 2021, average hourly earnings of construction employees reached their highest level ever, $32.11, and average weekly hours worked rose to their highest level since 2019's third quarter.
