U s Chamber Of Commerce

Recovery Stalls as Commercial Construction Contractors Struggle to Find Workers and Materials

Sept. 24, 2021
In the face of escalating challenges including worker shortages, materials shortages, and rising costs, commercial construction contractors are seeing a slowdown in the pace of their recovery from the pandemic, according to third quarter data.
U s Chamber Of Commerce

In the face of escalating challenges including worker shortages, materials shortages, and rising costs, commercial construction contractors are seeing a slowdown in the pace of their recovery from the pandemic, according to third quarter data from the U.S. Chamber of Commerce Commercial Construction Index.

Ninety-two percent of contractors report some level of difficulty finding skilled workers, with 55 percent indicating high levels of difficulty — a jump of 10 percentage points from the second quarter. The lack of workers has caused 42 percent of those contractors reporting difficulty finding workers to turn down work, up from 35 percent in the second quarter. 

Also, a record 93 percent of contractors report they are facing at least one material shortage. Prices are also a worry: An all-time high of 98 percent of contractors say building product cost fluctuations are having an impact on their business, up 35 points year-over-year.   

Contractors are facing concerns about supply chains, worker safety, and talent shortages as they look to recover from the pandemic. Contractors say that less availability of building products/materials is, by far, their top concern (62 percent) related to the COVID-19 pandemic, followed by worker health and safety concerns (38 percent), and an increase in worker shortages (37 percent). 

“This quarter’s Index findings demonstrate the fragility of our economy’s recovery from the COVID-19 pandemic. And unfortunately, these trends are not limited to the commercial construction industry,” said U.S. Chamber of Commerce executive vice president and chief policy officer Neil Bradley. “Across all sectors of the economy, businesses are facing tremendous difficulties finding skilled labor. Supply chain shortages and rising inflationary pressures are threatening to stop our economic resurgence in its tracks. We need to address our worker shortages, including by doubling legal immigration, and address supply chain issues, including through tariff reductions.” 

Contractors’ concerns are reflected in the Index score, which rose just one point this quarter to 66. Two of the three leading indicator scores—confidence in new business opportunities and backlog—improved slightly, while the score for revenue remained unchanged.  

However, contractors see improvements over the longer term. Ninety percent of contractors report a moderate to high level of confidence in the market’s ability to provide new business over the next year, up one point from Q2. Project delays caused by the pandemic also continue to improve: 60 percent are experiencing delays (down from 72 percent in Q2), with an average share of 15 percent of projects delayed (down from 17 percent in Q2).  

More Findings:  

  • Steel replaces lumber as most-reported shortage. Reversing a year-long trend, the product which most contractors are experiencing a shortage in is steel (34 percent), followed closely by wood/lumber at 31 percent. Since Q3, lumber had been the most often reported shortage. Last quarter, 33 percent of contractors reported a lumber shortage, 29% reported a steel shortage.  
  • Steel tariff concerns grow. As steel shortages worsen, 46 percent of contractors say steel and aluminum tariffs will have a high to very-high degree of impact on their business in the next three years, up 11 points from 35 percent in Q1 2021.  
  • Worker shortages are impacting business. This quarter, 73 percent of those contractors who report difficulty finding skilled labor say it’s a challenge to meet project deadline requirements (up from 56 percent in Q2), and 59 percent are putting in higher bids for projects (up from 50 percent). 
  • Equipment spending declines. More contractors report pulling back their purchasing plans this quarter: 40 percent say they will increase spending on tools and equipment over the next six months (down from 44 percent who said they would increase spending in Q2). 
  • Contractors are less confident in their revenue expectations. The percentage of contractors who expect their revenue to increase (37 percent) is down two points from last quarter, while more contractors (10 percent) expect their revenue to decrease, up from 6 percent in Q2.