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ABC: Construction Backlog, Confidence Increase
The Associated Builders and Contractors recently released its February Construction Backlog Indicator and Construction Confidence Index numbers, showing an increase in both reports. Much like last month’s report, despite the slight increase, the backlog remains elevated by historical standards.
According to a member survey conducted from Feb 20 to March 6, the CBI increased to 9.2 months, 1.2 months higher than in February 2022. The ABC notes that the backlog rebounded last month and for the past four months has hovered around highs not seen since the start of the pandemic.
The reading for the CCI in sales, profit margins and staffing levels also increased in February. ABC reports that all three indices remain above the threshold of 50, indicating expectations of growth over the next six months.
“Despite a gloomy economic forecast and extraordinarily elevated borrowing costs, contractor backlog and confidence continue to rise,” said ABC Chief Economist Anirban Basu.
“This mirrors the broader economy, which has thus far proved resilient in the face of rising interest rates. While economic strength, particularly regarding labor demand, is surprising, interest rate increases typically take 12 to 18 months to affect the broader economy, and the first interest rate increase occurred in March 2022.”
The backlog revealed a rise in numbers over many of the sectors, including:
However, the backlog did fall in a couple of the sectors, including:
The less than $30 million company size also remained stagnant at 8.2. ABC added that the Southern region continues to post the highest backlog of any region and, as of February, has had at least 11 months of backlog in four of the previous five months.
Looking at the CCI, the sales index increased from 60.7 to 61.2; profit margins increased from 55.6 to 55.8; and staffing increased from 62.4 to 62.8.
“While backlog remains at a historically elevated level, borrowing costs will continue to rise during the next several months, and contractors continue to struggle in the face of skilled labor shortages,” said Basu.
“If economic momentum fades this year, as a majority of forecasters continue to predict, then backlog and confidence may decline, especially for contractors working predominantly on privately financed projects.”
Labor Shortage Concerns, Job Openings Fall
In 2022, several reports indicated that the construction industry was undergoing challenges related to supply chain disruptions, labor shortages and recruitment all across North America.
At the end of March last year, there were 415,000 construction-industry job openings reported in the United States, a jump of 69,000 (20%) from March 2021. The month hike marked the largest total for any month since the government data series was inaugurated in 2000.
In an analysis of the data released between March and April 2022, the Associated General Contractors of America found that construction employment gained 2,000 jobs.
According to Ken Simonson, AGC’s Chief Economist, the pause in employment gains signified a shortage of qualified workers, rather than any slowdown in demand for projects. “In fact, job openings in construction hit an all-time high at the end of March, while the industry’s unemployment rate was the lowest ever recorded for April,” he said.
At the time, the report revealed that the unemployment rate among jobseekers with construction experience dropped just over 3% from 7.7% in April 2021 to 4.6% in May, the lowest April rate since the series launched. The number of unemployed construction workers fell by 304,000 or 40% to 464,000, a 22-year low for April.
The report went on to note that total construction employment inched up by 2,000 employees to 7,628,000 in April. Employment in residential construction rose by 3,800 workers, including 2,500 employed by homebuilders and multifamily general contractors and 1,300 at residential specialty trade contractors.
At the time, for the first time in eight months, nonresidential construction firms’ employment dipped by 2,000. According to the report, losses were limited to nonresidential specialty trade contractors, which shed 6,400 employees. General building contractors added 3,900 workers, while heavy and civil engineering construction firms added 500 employees.
However, earlier this month, an analysis of the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, construction industry jobs fell sharply by 240,000 on a monthly basis. The report indicated there were 248,000 job openings in January, with almost half of all construction job openings disappearing since the month prior. That number is also down 148,000 from the same time last year.
The latest report shows that the number of job openings decreased 6.5% to 10.8 million (-410,000) from December. In January, the largest decreases in job openings were in construction (-240,000), accommodation and food services (-204,000) and finance and insurance (-100,000).
On the flipside, the number of job openings increased in transportation, warehousing and utilities (+94,000) and in nondurable goods manufacturing (+50,000)
ABC found in its own analysis of the government data reports that on a year-over-year basis, industry employment has risen by 231,000 jobs, or 3.1%, at the beginning of this year.
In breaking down the numbers further, the report highlighted that nonresidential construction employment gained 17,900 positions on net, with growth in all three subcategories. Nonresidential specialty trade contractors added 10,200 net new jobs, while nonresidential building and heavy and civil engineering added 5,800 and 1,900 jobs, respectively.
However, these numbers were not broken down into residential and nonresidential construction jobs in January.
Overall, in January, the construction industry reportedly saw 391,000 hires, an increase of 5% from the month prior. Year-over-year, this number has increased 20.7%.
