Contractors are expecting less impact from tariffs and trade conflicts but still have a high degree of concern about the skilled labor shortage. That’s according to the Q1 2020 Commercial Construction Index (CCI), released by USG Corp. and the U.S. Chamber of Commerce.

The majority of data is from a survey of contractors conducted online from January 9-25, 2020. It represents contractor confidence prior to the COVID-19 pandemic and its effects.

Workforce Trends

Nearly two thirds of contractors expect to employ more workers over the next six months, an increase from 56% in Q4 2019. By region, the percentage is much higher in the Midwest (72%) and the South (65%) compared to the Northeast (31%). Larger companies (83%) also expect to employ more workers compared to midsize (57%) and small companies (53%).

The percentage of contractors that are having difficulty finding skilled workers fell four percentage points to 55% in Q1 2020. Nearly all contractors (92%) report at least a moderate level of difficulty but contractors in the South (60%) and Midwest (57%) are reporting a higher level of difficulty than those in the Northeast (24%).

Contractors’ perceived consequences of the skilled labor shortage have remained largely the same since Q4 2019. They include:

  • Being challenged to meet schedule requirements (72% of contractors);
  • Putting in higher bids for projects (69% of contractors); and
  • Turning down opportunities for work (42% of contractors).

However, more than twice as many trade contractors (59%) turn down work opportunities as a result of the skilled labor shortage compared to general contractors (25%). Small companies also are more likely to turn down work for this issue compared to large companies.

Contractors’ degree of concern about the cost of skilled labor grew in Q1 2020, with 38% reporting a high degree of concern compared to 33% last quarter. While most contractors (86%) are at least moderately concerned, more contractors in the South and Midwest are reporting a higher degree of concern.

Contractors’ concerns about adequate worker skill levels remain high in Q1 2020, with 91% of contractors reporting at least moderate concern about this issue. This concern is far lower in the Northeast where only 28% of contractors report a high level of concern over adequate worker skill levels compared to around half in the Midwest, South and West.

Nearly three fourths of contractors that were concerned about skill level reported that the difficulty in finding skilled workers remained about the same over the past six months and nearly one fourth thought the situation worsened. In the next six months, 34% of those same contractors expect the situation to worsen.

Access to Financing

Most contractors (78%) expect their access to working capital financing to remain the same in the next six months, with only 7% expecting it to become more difficult. To a lesser extent (66%), the majority of contractors also expect building owner access to financing to remain the same over the next six months.

Materials & Equipment

Around half of contractors (54%) expect to spend more for tools and equipment in the next six months, an increase of four percentage points from Q4 2019.

“With the high levels of work still currently reported, and their general optimism about the construction market, increased spending is not surprising,” reads the report.

The impact of material cost fluctuations on contractors’ businesses appears to be lessening, with 34% of contractors reporting low to no impact compared to 27% last quarter. Nearly half of trade contractors expect low to no impact from material cost fluctuations while more than one quarter of general contractors expect the same impact.

Contractors also expect less impact from tariffs and trade conflicts, with more than half reporting that they’re not experiencing product shortages on projects, up slightly from last quarter. Those that are experiencing shortages mostly report a moderate impact. More general contractors (58%) are experiencing product shortages on their projects compared to trade contractors (35%).

The percentage of contractors expecting a high degree of business impact from tariffs and trade conflicts in the next three years has also decreased from Q4 2019, with fewer contractors reporting a high degree of impact from steel and aluminum tariffs, new construction material and equipment tariffs, and trade conflicts with other countries.

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1 Comment

  1. Wow! Very impressive list. I will take some time to study these. Thanks.

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