The percentage of contractors who plan to employ more people in the next six months has been cut nearly in half since Q1 2020. That’s according to the Q2 2020 Commercial Construction Index (CCI), released by USG Corp. and the U.S. Chamber of Commerce.
In Q1 2020, 61% of contractors surveyed reported that they plan to employ more people in the next six months. That percentage dropped to 32% in Q2 2020. However, nearly half of contractors expect to keep the same number of employees with 15% expecting to employ fewer people, compared to just 2% in Q1 2020.
The percentage of contractors who are finding it difficult to find skilled workers has also dropped from 55% in Q1 2020 to 46% in Q2 2020. However, 56% of trade contractors find it very difficult compared to 36% of general contractors.
Fewer contractors this quarter report that skilled labor shortages are creating challenges, likely due to the heavy impacts of dealing with the COVID-19 pandemic. For example, nearly three-quarters of contractors reported that they’ve been challenged to meet schedule requirements due to the skilled labor shortage in Q1 2020. That percentage has dropped to 59% this quarter. The percentage of contractors who report putting in higher bids for projects and turning down opportunities for work have also decreased. However, far more trade contractors (47%) are turning down opportunities for work due to a shortage of skilled workers than are general contractors (19%).
The degree of contractor concern about the cost of skilled labor is consistent with previous quarters, with approximately half reporting moderate concern and one-third reporting high concern. Also consistent with previous surveys was the percentage of contractors reporting high concern about adequate worker skill levels. Nearly half report high concern with 43% reporting moderate concern in Q2 2020.
“Among those contractors concerned about worker skill level, 16% believe this issue will improve in the next six months, while only 5% believe it improved in the last six months. This
may be influenced by expectations of fewer projects advancing overall, which could increase worker availability,” reads the report
Access to Financing
More contractors are expecting change in the availability of working capital financing over the next six months compared to last quarter when 78% of contractors reported they expected it to remain the same. In Q2 2020, that percentage has dropped to 43%, with 18% expecting it to get easier and 30% expecting it to become more difficult.
“Those expecting it to get easier and those expecting it to become more difficult both increased by a wide margin, revealing that there is little certainty in the industry about the impact of the current crisis on financing availability,” reads the report.
The same trend could be seen with the percentage of contractors who expect change in building owner access to financing in the next six months. The percentage who expect it to remain the same dropped from 66% to 39% this quarter while 10% expect it to get easier and 38% expect it to become more difficult.
Materials and Equipment
Contractors are expecting to spend less on tools and equipment in the next six months than reported in Q1 2020. Approximately 50% expected to spend more last quarter, compared to just 28% this quarter. The percentage that expects not to spend more jumped from 38% to 59% this quarter. However, more general contractors (68%) than trade contractors (48%) report they will not be spending more money on tools and equipment in the next six months.
“The percentage of contractors expecting low/no impact on their businesses from material cost fluctuations continues to grow, from 19% in Q2 2019 to 39% in the current quarter. It is important to note that this finding is part of a preexisting pattern and does not appear to be the direct result of the COVID-19 crisis,” reads the report.
While the COVID-19 pandemic has impacted many aspects of business, 55% of contractors report that they are not experiencing product shortages, up two percentage points from Q1 2020. The percentage reporting a high to moderate impact of product shortages on projects remained consistent with last quarter’s results.