Worker, Material Issues Plague Construction


In a report released late last month, the U.S. Chamber of Commerce has found that contractors in the commercial construction industry are witnessing a slowdown in post-pandemic recovery.

The third-quarter Commercial Construction Index notes that worker shortages, material shortages and rising prices as just some of the industry’s ongoing challenges.

Report Details

Now in the third quarter of 2021, nearly all (92%) of contractors have reported some level of difficulty regarding finding skilled workers. However, this quarter specifically has witnessed a 10% jump from the second quarter, finding that 55% of contractors are now reporting high levels of difficulty.

As a result of the worker shortage, 42% of those contractors reporting difficulty have had to turn down work, up from 35% in Q2. Other notable data points include:

  • 73% of those contractors who report difficulty finding skilled labor say it’s a challenge to meet project deadline requirements (up from 56% in Q2); and
  • 59% of contractors are putting in higher bids for projects (up from 50%) because of worker shortages.

Shifting the focus to material shortages, the CCI reports that a record 93% of contractors are facing at least one material shortage. An all-time high of 98% of contractors say building product cost fluctuations are having an impact on their business (up 35 points year-over year). Additional report findings include:

  • Reversing a year-long trend, the product which most contractors are experiencing a shortage in is now steel (34%), followed closely by wood/lumber at 31%; and
  • As steel shortages worsen, 46% of contractors say steel and aluminum tariffs will have a high to very-high degree of impact on their business in the next three years, up 11 points from 35% in Q1 2021.

The report has also indicated a reduction in spending on tools and equipment, with only 40% of contractors planned to increase spending over the next six months (down from 44% who said they would increase spending in the second quarter).

“This quarter’s Index findings demonstrate the fragility of our economy’s recovery from the COVID-19 pandemic. And unfortunately, these trends are not limited to the commercial construction industry,” said U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley.

“Across all sectors of the economy, businesses are facing tremendous difficulties finding skilled labor. Supply chain shortages and rising inflationary pressures are threatening to stop our economic resurgence in its tracks. We need to address our worker shortages, including by doubling legal immigration, and address supply chain issues, including through tariff reductions.”

Overall, in terms of recovering from the COVID-19 pandemic, contractors report the following as their biggest concerns:

  • 62% struggle with less availability of building products/materials;
  • 38% are concerned with health and safety; and
  • 37% struggle with the increase in worker shortages.

Despite these concerns, which are reflected in the report’s Index score, contractors foresee improvements over the long term. In the third quarter, the index rose one point to 66. Two of the three leading indicator scores—confidence in new business opportunities and backlog—improved slightly, while the score for revenue remained unchanged. Some of those numbers include:

  • 90% of contractors report a moderate to high level of confidence in the market’s ability to provide new business over the next year (up one point from Q2);
  • 60% of contractors are experiencing delays (down from 72% in Q2); and
  • An average share of 15% of projects are delayed (down from 17% in Q2).

The percentage of contractors who expect their revenue to increase (37%) is down two points from last quarter, while more contractors (10%) expect their revenue to decrease, up from 6% in Q2.

Lastly, the Q3 2021 results from the three key drivers are:

  • Revenue: Contractors’ revenue expectations over the next 12 months held steady at 61;
  • New Business Confidence: The overall level of contractor confidence increased to 64 (up two points from Q2 2021); and
  • Backlog: The ratio of average current to ideal backlog rose three points to 74 (up two points from Q2 2021).

A full copy of the Q3 CCI can be viewed here.

Previous Reports

In Q1, 36% of contractors expected their revenue to increase over the next year, an 11% jump from Q4 2020. Other notable data points at the time included:

  • 87% expected their revenue to either stay the same or increase; and
  • 86% of contractors also reported a moderate to high level of confidence that the U.S. market would provide enough new business in the next year, while 24% reported a high level of that confidence.

In terms of skilled workers and raw material prices at the time, some numbers included:

  • 85% of contractors reported moderate to high levels of difficulty finding skilled workers, with 45% reporting a high level of difficulty;
  • 88% reported a moderate to high degree of concern about their workers having adequate skill levels, with 46% reporting a high degree of concern; and
  • 94% contractors who reported a moderate to high degree of concern expected the problem with workers having adequate skill levels to stay the same or get worse in the next six months.

In terms of materials costs and spending:

  • 71% of contractors said they face at least one material shortage; 22% of those are experiencing a shortage of wood/lumber;
  • 82% of contractors said cost fluctuations have a moderate to high impact on their business, while 43% said wood/ lumber was the product of most concern (followed by steel, 35%, and copper, 27%);
  • 35% of contractors said steel and aluminum tariffs would have a high to very high degree of impact on their business in the next three years;
  • 37% of contractors planned to increase spending on tools and equipment; and
  • 80% of contractors were still experiencing delays due to COVID-19, with an average share of 23% of their projects delayed, but that share was expected to drop to 15% in the ensuing six months.

Lastly, 58% of contractors said that worker health and safety remained the top concern for their business, followed by project delays and shutdowns (50%), fewer projects in general (35%) and building product availability as a whole (33%).

In the second quarter, the CCI reportedly increased three points to 65, but was still below core of 74 in Q1 2020 before the pandemic. Despite ongoing materials challenges, contractors were reportedly optimistic in their outlook for revenue expectations, new business opportunities, hiring plans and equipment spending.

Notable data points included:

  • 89% of contractors reported a moderate to high level of confidence in new business opportunities over the next 12 months, up from 86% in Q1;
  • Those indicating a high level of confidence jumped 10 points to 34% from Q1;
  • Over half (52%) of contractors said they would hire more employees in the next six months, up from 46% in Q1;
  • More contractors (39%) expected their revenue to increase in the next year, up from 36% saying the same in Q1; and
  • For the first time in a year, the percentage of contractors planning to spend more on tools and equipment in the next six months (44%) was higher than those who said they would not spend more (42%).

In terms of skilled workers and raw material prices at the time, some numbers included:

  • 88% reported moderate to high levels of difficulty finding skilled workers, of which, nearly half (45%) reported a high level of difficulty;
  • Of those who reported difficulty finding skilled labor, over a third (35%) turned down work because of skilled labor shortages;
  • 87% contractors reported a moderate to high level of concern about the cost of skilled labor; and
  • Of those who expressed concern, 64% said the cost has increased over the past six months, and more than three-quarters (77%) expected it to continue to increase over the next year.

In terms of materials costs and spending:

  • 84% contractors said they faced at least one material shortage, up from 71% in Q1;
  • One in three (33%) contractors were experiencing a shortage in wood/lumber, and 29% saw a shortage of steel;
  • Of those contractors experiencing shortages, 46% said they were having high impacts on projects, up from 20% saying the same in Q1;
  • 94% of contractors said cost fluctuations were having a moderate to high impact on their business, up 12% points from Q1 and up 35 points year-over-year;
  • 45% said steel and aluminum tariffs would have a high to very-high degree of impact, up from 35% in Q1;
  • 40% said new construction material and equipment tariffs would have a high to very high degree of impact, up from 29% in Q1; and
  • 30% expected high impacts from trade conflicts with other countries, up from 19% in Q1.

Other Recent Data

Last month, the American Institute of Architects confirmed in a new report that the Architecture Billing Index logged its seventh consecutive positive month.

The ABI score for August rose to 55.6 compared to 54.6 in July (any score above 50 indicates an increase in billings). Scores for both new projects inquiries and new design contracts moderated slightly but remained in positive territory, posting scores of 64.7 and 56.6, respectively.

Some key highlights from the August ABI include:

  • Regional averages: West (57.2); Midwest (55.2); South (52.5); Northeast (51.7); and
  • Sector index breakdown: mixed practice (56.0); commercial/industrial (54.7); institutional (54.4); multi-family residential (54.3).

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Despite the positive ABI, the Associated Builders and Contractors reported in its most recent Construction Backlog Indicator numbers that the backlog plummeted to 7.7 in August from the 8.5 that was recorded in July.

The ABC member survey was conducted from Aug. 19 to Sept. 1. The reading is down 0.8 months from July 2021 and down 0.3 months from August 2020.

Falling in most categories over the past month, the backlog revealed:

  • the Commercial and institutional industry, from 8.3 to 7.8;
  • the Heavy Infrastructure industry, from 8.1 to 5.4;
  • the Infrastructure industry, from 11.3 to 7.7;
  • the Northeast region, from 8.2 to 7.4;
  • the South region, from 9.8 to 8.9;
  • the West region, from 9.0 to 7.4;
  • the less than $30 million company size, from 7.9 to 7.4;
  • the $30-50 million company size, from 8.6 to 7.5; and
  • the greater than $100 million company size, from 16.0 to 10.4.

However, the backlog did gain in a few sectors, including the Middle States region (from 7.1 to 7.4) and in companies at $50-100 million (from 10.0 to 10.9).

Despite the slip in backlog, contractor confidence readings for sales, profit margins and staffing levels all remained above the threshold of 50, indicating expectations of growth over the next six months.


Tagged categories: Building materials; Commercial / Architectural; Commercial Buildings; Commercial Construction; Commercial contractors; COVID-19; Economy; Good Technical Practice; Jobs; Market; Market data; NA; North America; Raw materials; Workers

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