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Costs Still Concern as Employment Numbers Drop

Wednesday, June 9, 2021

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Construction employment has declined for the third time in the past four months according to an analysis of May jobs numbers from the Associated General Contractors of America. The data points to contractors coping with supply-chain problems and materials costs as well as a continuing reluctance for some to return to work.

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

According to AGC, seasonally adjusted construction employment in May totaled 7,423,000, a drop of 20,000 from the 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 COVID-19 pandemic.

The AGC also noted that the gap between residential and nonresidential construction has widened.

Janifest / Getty Images

Construction employment has declined for the third time in the past four months according to an analysis of May jobs numbers from the Associated General Contractors of America. The data points to contractors coping with supply-chain problems and materials costs as well as a continuing reluctance for some to return to work.

Residential construction firms gained 1,900 employees during the month and employed 35,000 more workers (1.2%) in May than in the pre-pandemic peak month of February 2020. However, the nonresidential sector shed 21,800 jobs in May and employed 260,000 fewer workers or 5.6% less than in February 2020.

“Contractors are being told they must wait nearly a year to receive shipments of steel and 4-6 months for roofing materials,” Simonson noted. “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.”

The AGC is again urging Congress and the Biden administration to end tariffs on materials such as lumber, steel and aluminum.

Recent Trade Talks

Trade ministers from the United States, Canada and Mexico met for two days at the end of May for the first time to review the U.S.-Mexico-Canada Agreement, which took effect in July 2020.

U.S. Trade Representative Katherine Tai, Mexican Economy Minister Tatiana Clouthier and Canadian Trade Minister Mary Ng met virtually this week and focused on topics such as fighting climate change and cracking down on the import of goods that are made with forced labor, according to a report from Reuters.

Topics discussed included Canada’s proposed digital tax as well as Ottawa’s allocation of dairy quotes; Canada’s concerns about U.S. lumber tariffs as well as the “Buy American” restrictions on infrastructure and public projects; and the interpretive differences between the countries on the automotive content rules as well as a review of transportation rules.

The statement put out, however, focused on a goal to reach out to underrepresented groups, with a plan to meet with small-business owners in October in San Antonio.

Additionally, just before those meetings, the U.S. Department of Commerce issued a preliminary determination in its second review of the softwood lumber imports from Canada and issued a combined anti-subsidy and anti-dumping duty rate of 18.32%. This is an increase from 8.99%.

The U.S. Lumber Coalition hailed the move.

“A level playing field is a critical element for continued investment and growth for U.S. lumber manufacturing to meet strong building demand to build more American homes,” said Jason Brochu, U.S. Lumber Coalition Co-Chair and Co-President of Pleasant River Lumber Company. “The U.S. Lumber Coalition applauds the Commerce Department’s continued commitment to strongly enforce the U.S. trade laws against subsidized and unfairly traded Canadian lumber imports.”

The National Association of Home Builders, meanwhile, said that the decision shows that the government simply does not care about housing affordability.

“At a time when soaring lumber prices have added nearly $36,000 to the price of a new home and priced millions of middle class households out of the housing market, the Biden administration’s preliminary finding on Friday to double the tariffs on Canadian lumber shipments into the U.S. shows the White House does not care about the plight of American home buyers and renters who have been forced to pay much higher costs for housing,” the NAHB said in a statement.

“This action clearly shows the White House is disingenuous when it claims the nation’s housing affordability crisis must be an important priority. This move certainly demonstrates a lack of courage to stand up to the U.S. lumber lobby that is already reaping record profits off the backs of hardworking American families.”

Meanwhile, Tai, along with U.S. Secretary of Commerce Gina M. Raimondo, met with European Commission Executive Vice President Valdis Dombrovskis to start discussions to address the global steel and aluminum excess capacity.

The leaders reportedly acknowledged the need for solutions that preserve critical industries and agreed to chart a path that ends the WTO disputes following the U.S. application of tariffs on imports from the EU under section 232.

The U.S. and EU reportedly agreed to hold other countries accountable and are beginning to work out resolutions.

Previous Employment Numbers

The analysis of April numbers from AGC revealed that employment remained stagnant between March and April despite high demand, pointing analysts once again to material prices and workforce issues.

Construction employment in April totaled 7,452,000, matching the March total but amounting to about 2.6% below the most recent peak in February 2020.

The number of former construction workers who were unemployed in April, 768,000, dropped by half from a year ago and the sector’s unemployment rate fell from 16.6% in April 2020 to 7.7% last month.

March saw a rebound by about 110,000 jobs that helped the sector climb out of a major February slump caused in part by severe weather.

Despite the encouraging March numbers, the AGC said at the time that projects are still threatened by the rising prices and subsequent erratic delivery schedule of some key construction materials such as wood, steel and aluminum.

The AGC noted that nonresidential construction remained at about 4.9% under the pre-pandemic peak while residential building and specialty trade contractors sat 1.6% above that February 2020 employment level.

As mentioned, employment plunged in February by about 61,000, and the AGC cited severe weather as the primary driver, as well as continued weakness in new nonresidential projects.

That slump was reportedly the first overall decline since April 2020.

   

Tagged categories: Associated General Contractors (AGC); COVID-19; Economy; Good Technical Practice; Jobs; NA; North America

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