Report: Contractors Show Concern Over Labor Shortage, Tariffs

While contractors are optimistic about the health of the U.S. economy during the next 12 months, they report difficulty finding skilled workers and concern over the recently implemented tariffs on steel and aluminum.

USG Corporation and the U.S. Chamber of Commerce recently released their Q2 2018 Commercial Construction Index, which uses backlog levels, new business outlooks and revenue expectations to calculate findings in the report.

Workforce

More than half of contractors expect to employ more workers in next six months, while 39 percent expect their workforce to remain the same. Sixty-five percent of small firms indicate having difficulty finding skilled workers, compared with 42 percent of large contractors (with a revenue of $100 million or more). Nearly two-thirds of trade contractors report difficulty finding skilled workers, compared to 48 percent of general contractors. The labor shortage appears to have hit harder in the South, Midwest and West than in the Northeast.

Concern over the availability of steel erection tradespeople has grown since Q1. The group is now tied for second in the skilled labor shortage ranking, up from sixth in Q1. Glazing is up to seventh place in Q2 from 11th in Q1.

Eighty-seven percent of contractors are moderately concerned about finding workers with adequate skill levels, while half are highly concerned. These numbers are down slightly from Q1.

“Among the contractors expressing concern about worker skill levels, more than one-third (37 percent) believe the problem has worsened in the last six months, and almost half (47 percent) believe it will continue to worsen in the next six months,” reads the report.

Financing

During the past 12 months, only 18 percent of contractors reported concern over how materials cost fluctuations would impact their businesses. In Q2, that percentage has more than doubled. The possibility of tariffs and trade wars, as well as the rising interest rates, have created uncertainty about material costs, according to the report.

However, contractors are still optimistic. Fifty-seven percent expect to spend on tools and equipment in next six months.

“In the current quarter, nearly two-thirds (63 percent) of contractors report being concerned about cost fluctuations for steel. This is in sharp contrast to the highly consistent findings in all previous quarters, when only about one-third reported concern. This finding is clearly tied to steel tariff implementation,” reads the report.

The percentage of contractors concerned about the impacts of steel and aluminum tariffs (58 percent) is nearly the same as those concerned with skilled labor shortages (56 percent).

Nearly half of contractors expect a high degree of impact from potential new construction material tariffs and from trade conflicts with other countries, according to the report.

Steel tops the list of concerns, with 86 percent of respondents expecting to see at least moderate to severe impact on business in the next three years. Some contractors even suggest price increases could eventually have a negative impact on the volume of projects available.

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