CCI: Contractors Concerned about Labor Shortage, Materials Costs

According to the Q2 2019 Commercial Construction Index (CCI), contractors, including specialty trade and general, expect to increase hiring in the second half of 2019 despite the persistent challenge of finding skilled workers. Produced by USG Corp. and the U.S. Chamber of Commerce, the report also indicates that contractor confidence has improved this quarter.

Workforce Trends

The CCI shows that contractors’ concerns about finding skilled workers have remained the same since Q1 2019, with 54% reporting that finding skilled workers is difficult and 40% finding it a moderate challenge. Nearly two-thirds of specialty trade contractors reported a high level of difficulty in finding skilled workers, compared to nearly 50% of general contractors. However, 60% of contractors overall anticipate employing more people in the next six months, a figure that’s up 5% from last quarter.

Forty-six percent of contractors report strong concerns over worker skill levels. Despite these concerns, respondents seem to be more optimistic than they were over the past 12 months. Regarding how they’ve been impacted, contractors report that the skilled labor shortage has required them to:

  • Ask skilled workers to do more work (73%);
  • Be challenged to meet schedule requirements (61%);
  • Put in higher bids for projects (63%); and
  • Turn down opportunities for work (47%).

More contractors reported turning down work due to the skilled labor shortage this quarter than in Q1 2019 (40%). However, fewer reported that they are challenged to meet schedule requirements or are asking workers to do more than in the previous three quarters.

“This may be a reflection of contractors adjusting their practices to accommodate this persistent issue,” the report suggests.

Severe concern about the labor shortage is most prevalent in the Western and Southern regions and least prevalent in the Northeast.

Access to Financing

Two-thirds of contractors expect owner access to financing to become easier or to remain the same over the next six months, while 20% expect it to become more difficult.

Materials and Equipment

Spending on tools and equipment remained steady in Q2 2019, with 48% of contractors expecting to spend more on those items, the report indicates, an increase of 1% over last quarter.

Contractors do expect a moderate to high impact on their projects from fluctuations in costs for materials, with 26% expecting high impacts and 53% expecting moderate impacts.

So far as material shortages are concerned, since Q4 2018, the CCI has shown that contractors are reporting moderate rather than high impacts on their businesses. Seventy-one percent reported a moderate impact this quarter, up from 66% last quarter.

Contractors expect a high degree of business impact from the following factor in the next three years:

  • Recently imposed steel and aluminum tariffs (31%);
  • New construction material and equipment tariffs (31%); and
  • Trade conflicts with other countries (25%).

The concern over metal and equipment tariffs has decreased since last quarter.

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