Fourth Quarter Construction Update: The Good, the Bad, and the Ugly
By Anirban Basu, Chief Construction Economist, Marcum LLP
Issue 38 – Fourth Quarter 2021
The construction industry continues to wrestle with shifts in how people work, where they work, how they conduct business meetings, shifting residential migration patterns, massive skills/labor shortfalls, and inflation, including in the form of rapidly rising materials prices. Despite ongoing economic recovery, nonresidential investment in structures continues to decline. At the same time, data and fulfillment center construction segments remain red hot in the context of the ongoing e-commerce revolution. What’s more, despite tightening monetary policy, contractors continue to remain upbeat regarding business prospects for 2022 along the dimensions of sales, staffing, and margins.
According to Associated Builders and Contractors’ Construction Confidence Index, more than 65 percent of contractors expect their sales to increase during 2022’s initial half, while fewer than 13 percent of contractors expect sales to decline. Contractors are slightly less optimistic regarding profit margins in the context of labor shortages and elevated materials prices, with about 48 percent expecting margins to expand over the next two quarters, while
The construction industry has regained approximately 91 percent of the jobs lost during the initial two months of the pandemic. As of January 2022, industry employment is still 101,000 jobs short of the February 2020 level. Had industry employment growth proceeded at the pre-pandemic rate, there would have been about 8.1 million employed construction workers today, or about a half-million more than what has actually transpired.
Nonresidential construction spending declined 0.7 percent in December 2021, the most recent month for which data are available. These numbers are not adjusted for inflation. Nonresidential construction spending is up 3.9 percent year-overyear, but once one factors in inflation, this represents a setback in real terms.