Infrastructure package will bolster construction industry but inflation, labor will remain challenges in 2022
The $1 trillion infrastructure package recently signed into law by President Joe Biden is largely expected to be a boost for the construction industry.
But where firms will find workers to complete these projects is a big question the industry is contending with.
Anirban Basu, chairman and CEO of Baltimore-based Sage Policy Group and chief economist at trade organization Associated Builders and Contractors, said during a forecast event Wednesday the construction industry remains 115,000 jobs short of where it was pre-Covid-19.
The Associated General Contractors of America this month found construction employment increased by 31,000 jobs between October and November, the third consecutive month of job gains for the nonresidential building sector. Construction employment in November stood at a little more than 7.5 million.
Despite those recent gains in employment, the industry continues to struggle to find workers. That’ll become especially tough in 2022, when bidding for infrastructure projects spurred from the federal bill starts ramping up, Basu said.
During the pandemic, millions of baby boomers decided to retire, some earlier than expected. In construction, Basu said about 1.5 million boomers departed the industry, and prospects for replacing those workers are somewhat grim.
“Many of these older construction workers are really dedicated to the industry,” Basu said. “This was their dream. They took shop class in high school. There’s often where people learned to love working with heavy equipment. It’s far more difficult to convince younger people that construction leads to prosperity.”
He said younger workers today, especially in light of the pandemic, tend to gravitate to jobs that allow them to work remotely and on a flexible schedule.
The AGC also noted struggles with finding labor in relation to the expected boost in jobs from the federal infrastructure bill.
“These new federal investments will create many new career opportunities in construction; now we need to make sure potential workers are aware of those opportunities and prepared to take advantage of them,” said Stephen Sandherr, the association’s CEO, in a statement earlier this month.
In fact, passage of the bill comes at an awkward time, Basu said, because of the construction labor shortage and the impact inflation has on pricing.
Sage Policy Group’s analysis of construction materials pricing found natural gas has spiked the most over a 12-month period, between October 2020 and October 2021, at 231.3%. Steel mill products are No. 2, with a 141.6% jump, and crude energy materials ranked third, with 135.6% annual growth.
The ABC’s quarterly contractor confidence index has found, through the pandemic, construction firms are feeling more pessimistic about profit margins than they are about sales and staffing. Cost of materials is factoring in to that sentiment.
“Construction financial professionals have become somewhat downbeat because, what they’re focused on is, we have all of this work coming in, how can we maintain this and our profit margin, given the inflationary environment?” Basu said.
It’s possible relief is coming — but not right away. Basu said he’s forecasting materials used in construction, including steel, will start to see price decreases toward the end of 2022. Projects associated with the federal infrastructure bill may also start to ramp up around the same time.
Next year, it’s likely public infrastructure projects — water and sewer systems, schools, roads and bridges — will see a spike in construction activity. Data centers, fulfillment centers and health-care real estate will also be big for construction, Basu added.