By Donna Laquidara-Carr, Ph.D., LEED AP, Industry Insights Research Director, Dodge Data & Analytics
The quarterly USG Corporation + US Chamber of Commerce Commercial Construction Index, first launched in 2017, has consistently revealed a booming construction market, with strong levels of backlog, a high degree of optimism about the ability of the market to provide new work and strong revenue expectations, and the Q3 2018 report continues that trend. A slight shift downward in revenue expectations from Q2 is more than balanced by ongoing optimism and the strongest ratio of average backlog to average ideal backlog since tracking those figures began.
However, the strength of the market is also exacerbating the two concerns that contractors have: material price fluctuations and workforce shortages. Concern about material price fluctuations is relatively recent. In Q3, 44% of contractors say that they believe material cost fluctuations will have a high impact on their business. This is an increase of 7 points from Q2, but it is a leap of 39 points from Q1, and is notably higher than all the findings in 2017. The recent steel and aluminum tariffs clearly contribute to this increased concern, but they are not solely response for it, since contractors reporting that they are concerned about the impact of those tariffs on their business slightly declined from 58% in Q2 to 51% in Q3. Clearly, other inflationary factors are also impacting the costs of materials, and it will be interesting to see if concern on this issue continues to rise.
Far more consistent since Q1 2017 has been the challenge of finding skilled workers. In the third quarter of 2018, 94% of contractors report that this is at least a moderate concern to them, and over half (57%) report that it is a major concern. Over half (55%) also report a high degree of concern about the skill levels of the workers being hired, in addition to the general shortage of workers with specific skills.
The Q3 study also included questions about the safety impacts of factors that have created challenges in the construction industry recently, with a particular focus on skilled worker shortages and the use of substances that can impair performance, such as alcohol, marijuana and opioids.
Unfortunately, many contractors believe that one of the side effects of skilled worker shortages are increased safety risks on their projects. Most contractors (80%) are moderately to highly concerned about jobsite safety risks due to workforce shortages. To combat these risks, most contractors believe that placing these workers in an environment where safety is clearly prioritized and is a fundamental value of the company is the best strategy. Almost two thirds (63%) say that a top strategy to reduce the safety risks due to workforce shortages is to improve the safety climate on jobsites, and well over half (58%) regard improving the safety culture at the firm as a top strategy.
Over half of contractors also state that they are at least moderately concerned about the risks created by workers using marijuana (54%) and alcohol (58%), but when it comes to substances impairing workers, the greatest concern is about the use of opioids, shared by nearly three quarters (71%). Unfortunately, when asked whether they have a strategy in place to reduce these risks, only half of the contractors concerned about opioids have a plan in place to deal with this problem, fewer than those who have a strategy about alcohol (62%) and marijuana (61%). This is particularly the case for smaller contractors. While over 80% of contractors with revenues of $100 million and more who are concerned about alcohol, marijuana and opioid use have a strategy to reduce the risks created by these issues, only about half of smaller companies have strategies for alcohol and marijuana, and only 39% of them have strategies for dealing with opioids. More resources need to be made available to help smaller firms mitigate these challenges.
So what are the strategies that are being employed? The most common is testing, followed by pre-screening employees. Companies also provide education/communication about these substances, and a few offer counseling and access to rehabilitation. Many also report relying on oversight by supervisors, and a few discuss their zero tolerance policies.
These findings demonstrate the economy continues to support robust construction activity, but there are a few challenges that may ultimately apply the brakes to the accelerating market.
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Allison Heard | 104 West Partners | firstname.lastname@example.org
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