The Construction Industry - Maintaining a Solid Foundation in a Changing Environment 

The pandemic, supply chain issues, and labor shortages knocked the construction industry down, but unabated project volume provided a strong foundation going forward.

Todd R. Robertson, PE, CRE, CMRP, LEED AP, PMP

Head of Technical Services, North America

Over the past two years, the United States’ construction industry — including vital trades — has faced unprecedented challenges, including pandemic-related lockdowns, lack of skilled labor, supply chain issues, and an increase in material costs as a result of 40-year high inflation. As the U.S. economy remains in flux from the threat of recession, ongoing, albeit lessened, pandemic concerns, and a slow return to normal life, other factors indicate that the U.S. construction industry — which includes everything from construction of commercial buildings to capital projects — is weathering this instability thanks to a continued demand for infrastructure, manufacturing, and construction. These factors that contribute to the vibrancy of the construction market are input costs, supply chain issues, and labor supply and wages.

Materials Costs Trending Downward

In June of 2022, key construction materials such as steel, copper, gypsum, lumber, and plywood reached historically high prices following steady increases beginning in April 2020. These commodities are captured in the Producer Price Index (PPI) and tracked as a measure of inflation. The escalated expense threatened to destabilize the construction industry as corporations, developers, and property owners slowed or delayed plans for new builds, improvements, and/or capital projects. Since July, however, the PPI has trended downward, with October 2022 numbers below the June high. This decline is expected to continue, allowing demand to stabilize and building and projects to normalize over the next several months, especially with global supply chain issues finally beginning to abate.

Supply Chain Stabilizing

From February 2020, delivery times for materials needed to complete construction projects were delayed as factories across the globe shuttered to mitigate the health impact of COVID-19. As manufacturers resumed production and shipping re-started, issues at major ports stemming from a lack of receiving personnel and truck drivers, especially on the West Coast, led to long waits to offload, increasing delivery times and compounding the existing shortages. The war in Ukraine also kept raw materials like pig iron for steel and neon used in the manufacture of semiconductors from conversion into a final product. All of the delays in supply chain affected a wide array of products, including wallboard, insulation, windows, paint, and transformers.

The positive news is that the global supply chain has begun to normalize as inflation impacts consumer demand and producers shift to a more regionalized model that fosters resiliency and timely deliveries. This trend should continue for the foreseeable future, making supply more reliable and shortages much less likely — and keeping costs more affordable and projects well-supplied. With the products on hand at the right time to get the job done, all that is needed is a skilled labor force to complete the projects.

War for Talent Impacting Construction

The pandemic had a significant effect on the construction industry, with more than 1 million workers furloughed for more than two months during the U.S. lockdowns of February to April 2020. Since then, employment in the construction industry has bounced back, but firms are still short workers. Unlike other industries that have seen accelerated growth in wages among professionals, the construction trades saw wages shrink since the pandemic — from 20% to 23% overall. This makes attracting and retaining qualified, skilled talent more difficult in an already challenging time. What’s more is that the construction industry is expected to see 12% job growth to 2031, but approximately 41% of its current labor force will be eligible to retire by the same year.

An additional pressure is that unlike previous generations, millennials are not entering the trades like others before them, seeking instead more flexible, remote opportunities. A higher starting wage than most white-collar professions with an almost endless earning opportunity is one of several positives that may attract millennials to the construction trade. Their college-graduate counterparts average nationally just $34,000 per year starting out with salary variations occurring regionally and are saddled with student loan debt averaging $37,000.

Need for Balancing Growth and Issues Ahead

There is no doubt that, like other industries, the U.S. construction and trades industry has unique challenges ahead of it to succeed in a changing economy faced with supply chain issues, labor shortages, and material cost increases. The forecast for the industry is positive with projected growth and the issues of supply chain and inflation finding a better balance over the next six to nine months. The construction industry will have to embrace younger workers and find new ways to attract them to fill the void left as baby boomers and Generation X retire, but with a higher-than-average starting wage, the industry can succeed with both millennials and Gen Z by changing perceptions.

ISS: A Resource in Challenging Times

In this unpredictable environment, organizations considering initiatives that require construction in their office, manufacturing, laboratory, or other commercial space will benefit from a partner with the ability to accurately estimate costs, navigate supply chain challenges, manage schedules, and mitigate these factors to successfully deliver projects on time and within budget. ISS has the resources, experience, and expertise to assist, leading project initiatives from concept to completion to ensure a client’s workspace reflects the reality of its workplace.

Learn more about ISS’ Project Management & Delivery services here.

About the Author

Todd R. Robertson, PE, CRE, CMRP, LEED AP, PMP

Head of Technical Services, North America

Contact Toddmailto: todd.robertson@us.issworld.com?subject=Inquiry