Two major surveys of construction business sentiment point to significant optimism for the coming year. The Associated General Contractors of America (AGC) and Wells Fargo have completed extensive surveys of contractor sentiment and despite some residual challenges presented by Covid, the majority believe it will be a year of significant industry growth.
The Wells Fargo Industry Forecast shows that the benchmark U.S. National Optimism Quotient (OQ) registered 112. Anything above 100 is “strongly optimistic” and the new figure represents a 44% increase from the 2020 level.
The Infrastructure Bill
The survey shows that much of the optimism is due to the passage of the bipartisan Infrastructure bill. The construction industry widely supported the Infrastructure Plan. It is certain to create many new jobs for years to come with new large projects that will keep the industry growing. Many suppliers and ancillary businesses will see big gains in revenue as well.
The AGC survey found contractors optimistic across a wide range of construction sectors. In fact, they anticipated significant growth in 15 of 17 categories. Much of the excitement was in sectors directly affected by the infrastructure bill. Increased Federal spending means an expanding business for those who are building highways, bridges, transportation-related projects as well as utilities.
In private sector categories, expectations were highest for warehouses and healthcare as well as multifamily residential construction.
The two categories that saw a negative outlook in AGC’s survey were retail and private office construction.
Along with allocating billions of dollars to new projects, the Infrastructure bill along with administrative actions will ease the supply chain problems faced by the industry.
An unexpectedly robust holiday season meant that ports and transportation networks were jammed with electronics and consumer goods. Now that we have gotten through that surge, some of the pressures on the supply chain should diminish. Back in October, the Biden administration announced a plan to keep the ports of LA and Long Beach open 24 hours, seven days a week. The two ports account for 40% of container traffic entering the US. Since then, the number of container ships waiting for weeks or months outside the ports has been greatly reduced.
Availability and pricing of building materials have already started to come back to a more contractor-friendly level.
Worker shortages while still a problem, should recede over the course of the year. Some of the conditions that have kept workers out of the job force will shift back. As fewer workers have to deal with being sick or having to look after sick families there will be many who want to get back to working full time again. We can also look forward to a less restrictive immigration policy that can offer a larger worker pool.
Part of the trick for the labor shortage will be to reverse a decades-long trend where more workers retire than enter the construction job force. Younger people have been attracted to less physically demanding and dangerous careers. The industry will have to be creative to find ways to fill its ranks by not only increasing wages but addressing issues of safety, flexibility, and advancement.