North Carolina’s contractors expect increasing demand for numerous types of projects in 2022 despite ongoing supply chain and labor challenges, as most firms plan to add workers this year, according to survey results released on Jan. 12 by the Associated General Contractors of America and Sage.
Data for North Carolina indicates that 82 percent of employers plan to increase their headcount in 2022, with only 4 percent expecting reductions (the remaining 14 percent see no change ahead). The hiring demand is reflected in a labor shortage — 86 percent of contractors say they are “having a hard time filling some or all positions.” Almost all of the contractors (96 percent have responded to environment by increasing pay, benefits and/or offering incentives.
These changes, plus rising materials costs, have caused 89% of the contractors to report that “costs have been higher than we anticipated. Supply chain problems are adding to costs, and resulting in project delays and in some cases cancellations.
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” Stephen E. Sandherr, the association’s chief executive officer, said in a Jan. 12 statement. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
Nationally, the percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract – known as the net reading – in 15 of the 17 categories of projects included in the survey. Contractors are most optimistic about the market for highway and bridge construction, which has a net reading of positive 57 percent. They are similarly optimistic about transit, rail and airports projects, with a net reading of 51 percent, and water and sewer projects, with a net reading of 50 percent.
These segments all stand to see increased federal investments because of the recently passed Bipartisan Infrastructure bill. Contractors are also upbeat about demand for federal construction projects, with a net reading of 37 percent, and power construction, with a net reading of 29 percent.
The highest expectations among predominantly private-sector categories, with a net reading of 41 percent each, are for warehouses and other healthcare facilities, which includes clinics, testing facilities and medical labs. The outlook for hospital construction is also strong, with a net reading of 38 percent.
Contractors were also optimistic about multifamily residential construction, with a net reading of 32 percent, and manufacturing construction, with a net reading of 27 percent. Expectations were more subdued, however, for public buildings, with a net reading of 20 percent; kindergarten through 12th grade school construction, with a net reading of 19 percent; higher education facilities, with a 16 percent net reading; and lodging, with a 6 percent net reading. Only two categories received negative net readings, both of -8 percent: retail and private office construction.
Optimism about growing demand for many types of construction projects is leading many firms to plan to hire workers this year. Seventy-four percent of respondents expect their firms will expand headcount in 2022, compared to just 9 percent that who expect a decrease. Forty-seven percent of firms expect to increase their headcount by 10 percent or less. However, 22 percent say their headcount will grow by 11 to 25 percent and 5 percent anticipate an increase of more than 25 percent.
Adding those workers will be a challenge, however. An overwhelming 83 percent report they are having a hard time filling some or all salaried or hourly craft positions, compared to only 8 percent who say they are having no difficulty. And three-fourths of respondents say it will continue to be hard to hire or will become harder to hire this year.
The pandemic continues to impact the construction industry, association officials noted. Eighty-four percent of respondents report costs have been higher than anticipated, while 72 percent say projects have taken longer than anticipated because of the pandemic. As a result, 69 percent have put higher prices into bids or contracts, while 44 percent have specified longer completion times.
Supply chain bottlenecks are also impacting construction. Only 10 percent of firms report they have not had any significant supply chain problems. Sixty-one percent have turned to alternative suppliers for materials and 48 percent have specified alternative materials or products.
Rising construction costs and slowing schedules have contributed to a significant number of project delays and cancellations. Forty-six percent of contractors report having a project delayed in 2021 but rescheduled, while 32 percent had a project postponed or canceled that has not been rescheduled.
“The last two years have become increasingly unpredictable, due in large part to the coronavirus and public officials’ varied reactions to it,” said Ken Simonson, the association’s chief economist. “But, assuming current trends hold, 2022 should be a relatively strong year for the construction industry.”
Association officials urged public officials to take steps to help the industry recover in 2022 and avoid measures that will undermine the sector. They noted that the Biden administration’s vaccine mandates will prompt many vaccine-hesitant workers to leave the relatively few employers covered by the orders and move to smaller firms that are not covered by the rule and employ over 60 percent of the industry’s workforce.
“Given how many firms are currently looking to hire, many vaccine-hesitant workers will be able to switch jobs instead of taking a shot they have already resisted for over a year,” Sandherr said. He added that the administration’s plans to increase tariffs on Canadian lumber and maintain existing ones on other key construction materials will make it harder for firms to accurately bid upcoming projects and complete them on schedule.
Sandherr said the association will continue to push for new federal investments in workforce development and make sure Congress keeps its promise to boost funds for infrastructure. He added the association would continue to encourage construction workers to get vaccinated, and is planning to release new Spanish-language public service ads on the subject later this month to accompany a series of ads encouraging vaccinations AGC released last year.
“Our ultimate goal is to make sure that contractors’ optimistic outlook for 2022 becomes a reality,” Sandherr said.
The Outlook was based on survey results from more than 1,000 firms from all 50 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans. Click here for Expecting Growth While Coping with the Lingering Impacts of the Pandemic: The 2022 Construction Hiring & Business Outlook. Click here for the survey results.