Commercial Contractors are Confident about the Economy but Worry about Labor Shortages and Tariffs

Jun 05, 2018 - 4:15pm

Worries about finding enough workers and trade are top of mind for the commercial construction sector.

The Q2 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index shows four straight quarters with more than 90% of contractors concerned over labor shortages. Concerns increased quarter over quarter, with 47% of respondents expecting problems finding skilled workers to worsen in the next six months.

“Contractors’ pipelines for new business are consistently healthy, however, that optimism is challenged by a growing shortage of workers – a trend that’s persisted for more than a year,” said Jennifer Scanlon, president and chief executive officer of USG Corporation.

Developing our nation’s talent pipeline to close the skills gap and cultivate a highly-trained workforce of tomorrow, is a top priority for the U.S. Chamber.

Recent trade policy developments also have contractors worried.

Two-thirds (63%) of contractors identified steel fluctuations as their top material of concern, a sharp increase from the 30% of contractors who expressed concerns in Q2 2017 and the largest fluctuation in contractor sentiment to date. Most contractors (86%) also feel recently-imposed tariffs will have at least a moderate impact on their business.

“The commercial construction industry is vital to the growth of the U.S. economy. Steel and aluminum tariffs and continued workforce shortages threaten to slow the industry’s growth and job creation,” said Thomas Donohue, president and CEO of the U.S. Chamber. “We must embrace free enterprise, rather than undermine the competitiveness of American business, as well as invest in a skilled and motivated workforce to ensure our companies and job seekers alike have the platforms to compete on a global scale.”

Overall, contractors are confident about the economy, with a steady level of new business confidence and revenue expectations. The second quarter Index score was 73, down one point from the first quarter.

The second quarter results were driven by:

  • Backlog: Contractors currently hold an average of 9.3 months of backlog. This represents 73% of ideal backlog levels and indicates a stable market with room for growth.
  • New Business: Contractors have high confidence in the market’s ability to provide new business for the next 12 months. Nearly all (96%) contractors report high or moderate confidence in the demand for commercial construction.
  • Revenues: Over half (52%) of contractors expect to see revenue gains in the next year, an increase of 12% year-over-year.

Sustainable building appears to be an emerging area of opportunity, with nearly half (45%) of respondents reporting its ability to give them a competitive business advantage. To meet demands, more than half (56% ) of contractors report registering or certifying their U.S. projects with the U.S. Green Building Council (USBGC) or Leadership in Energy and Environmental Design (LEED) over the past three years. Four out of five contractors also cite that their customers request energy efficient materials for their U.S. projects, which shows demand for green materials is strong.

By working effectively with the business community to train workers to fill open jobs, and calm rough trade waters, policymakers can lift some weight off commercial contractors.

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