In Search of Workers

 

Construction employment dipped by 5,000 jobs between December and January even though hourly pay rose at a record pace in the past year, according to an analysis by Associated General Contractors of America of government data released last week. Association officials said future job gains are at risk from several factors that are slowing projects.

“Contractors are struggling to fill positions as potential workers opt out of the labor market or choose other industries,” said Ken Simonson, the association’s chief economist. “In addition, soaring materials costs and unpredictable delivery times are delaying projects and holding back employment gains.”

Simonson noted that average hourly earnings in the construction industry increased 5.1% from January 2021 to last month, the steepest 12-month increase in the 15-year history of the series. The industry average of $33.80 per hour exceeded the private-sector average by nearly 7%. However, competition for workers has intensified as other industries have hiked starting pay and offered working conditions that are not possible in construction, such as flexible hours or work from home.

Since January 2021, the industry has added 163,000 employees despite the decline last month. But the number of unemployed job seekers among former construction workers shrank by 229,000 over that time, indicating workers are leaving the workforce altogether or taking jobs in other sectors, Simonson added.

Ken Simonson

“Contractors are struggling to fill positions as potential workers opt out of the labor market or choose other industries.”

Construction employment totaled 7,523,000 last month, which was 101,000 (1.3%) fewer jobs than in the pre-pandemic peak month of February 2020. However, he noted, the totals mask large differences between residential and non-residential segments of the industry.

Non-residential construction firms — general building contractors, specialty trade contractors, and heavy and civil engineering construction firms — lost 9,000 employees in January. Non-residential employment remains 213,000 below the pre-pandemic peak set in February 2020. In contrast, employment in residential construction — comprising home-building and remodeling firms — edged up by 4,400 jobs in January and topped the February 2020 level by 112,000.

Association officials said the Construction Hiring and Business Outlook survey it released in January showed most contractors expect to add employees in 2022 but overwhelmingly find it difficult to find qualified workers.

“Construction firms are struggling to find workers to hire even as they are being forced to cope with rising materials prices and ongoing supply-chain disruptions,” said Stephen Sandherr, the association’s CEO.

Speaking of which, construction materials jumped nearly 20% in 2021 despite moderating in December, according to an an association analysis released last month. An association survey shows that contractors rate material costs as a top concern for 2022.

“Costs may not rise as steeply in 2022 as they did last year, but they are likely to remain volatile, with unpredictable prices and delivery dates for key materials.”

“Costs may not rise as steeply in 2022 as they did last year, but they are likely to remain volatile, with unpredictable prices and delivery dates for key materials,” Simonson said. “That volatility can be as hard to cope with as steadily rising prices and lead times.”

In the association’s 2022 Construction Hiring and Business Outlook Survey, material costs were listed as a top concern by 86% of contractors, more than any concern. Availability of materials and supply-chain disruptions were the second-most-frequent concern, listed by 77% of the more than 1,000 respondents.

The producer price index for inputs to new, non-residential construction — the prices charged by goods producers and service providers such as distributors and transportation firms — increased by 0.5% in December and 19.6% in 2021 as a whole. Those gains topped the rise in the index for new, non-residential construction — a measure of what contractors say they would charge to erect five types of non-residential buildings, Simonson noted. That index climbed by 0.3% for the month and 12.5% from a year earlier.

Prices moderated for some construction materials in December but still ended the year with large gains, Simonson observed. The price index for steel-mill products rose 0.2% in December, its smallest rise in 15 months, but soared 127.2% over 12 months. The index for diesel fuel declined 5.3% for the month but increased 54.9% for the year. The index for aluminum mill shapes slid 4.9% in December but rose 29.8% over 12 months, while the index for copper and brass mill shapes fell 3.3% in December but rose 23.4% over the year.

Some prices accelerated in December. The index for plastic construction products climbed 1.3% for the month and 34.0% over 12 months. The index for lumber and plywood rose 12.7% for the month and 17.6% for the year.

Association officials said rising materials prices threaten to undermine what is otherwise a strong outlook for the construction industry in 2022. They urged the Biden administration to reconsider its plans to double tariffs on Canadian lumber and leave other trade barriers in place that artificially inflate the costs of key construction materials.

“Making lumber and other materials even more expensive will not tame inflation, boost supplies of affordable housing, or help the economy grow,” Sandherr said. “Instead, the administration should be removing tariffs and beating inflation.”