Inflation Nation

One item has dominated all others in recent discussion of the economy – inflation. An accretion of past stimulus, ongoing policy support for economic growth, and ongoing supply chain issues have conspired to drive economywide and construction costs higher. The good news is that with such an abundance of liquidity and capital flowing through the U.S. economy, there is plenty of demand for real estate, which often translates in demand for construction services. A recently passed infrastructure package will also support many equipment distributors and contractors going forward.

While there is plenty about which to complain, for now the U.S. economy is also characterized by ongoing pandemic era recovery. The U.S. construction industry added 44,000 jobs on net in October 2021, the last month for which there is data. Since May 2020, when the labor market recovery commenced, construction has recovered 963,000 jobs. That leaves the industry about 150,000 positions short of where it was prior to the pandemic. Approximately 86.5% of all construction jobs lost during the COVID-19 induced recession have been recovered.

Given that there are fewer construction industry jobs than during the early months of 2020, the construction labor market is already associated with a dearth of available construction workers and rapidly rising wages. Industry unemployment has dipped to 4%, and many of the available workers lack the skills necessary to fill jobs in carpentry, roofing, glazing, HVAC, electrical, plumbing and other forms of work. Construction unemployment is roughly equivalent to what it was in 2019, the last pre-pandemic year in America.

But there’s a difference between now and then. During the pandemic, many Baby Boomers retired earlier than they or their employers had anticipated. Many of these workers were among the finest in construction America, building up skills over the course of decades and taking great pride in the physical manifestations of their efforts.

With that demographic cohort disappearing in growing numbers from the workforce, younger generations are left to fill the void. But many young people have looked elsewhere for career opportunities, with their parents having come to believe that the only reasonable pathway to prosperity is through the attainment of formal educational credentials, including the coveted four-year college degree.

Consequently, there are more unfilled job openings in construction than there were in early-2020. In February 2020, just before the economy was undone by Covid, there were 330,000 available, unfilled construction jobs in the U.S. By September 2021, this tally had risen to 333,000, likely an understatement of need since some contractors have apparently given up on the hiring process.

Within construction, life has been especially tumultuous for nonresidential specialty trade contractors. During the early stages of the pandemic, the overall construction industry shed about 14% of its jobs. But nonresidential specialty trade construction lost nearly 16% of its positions. While that doesn’t sound like much, many specialty contractors are small, and the loss of even a single key worker can be deeply problematic.

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About the Author

Anirban Basu

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, MD. He is one of the Mid-Atlantic region’s most recognizable economists in part because of his consulting work on behalf of such clients as prominent developers, bankers, brokerage houses, energy suppliers, and law firms.

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