Material price spikes, supply chain problems threaten construction industry, AGC says

Construction employment in February remained below pre-pandemic levels in all but six states, according to an analysis by the Associated General Contractors of America of government employment data released March 26, while soaring materials costs and supply-chain problems threaten future employment. The association issued a “Construction Inflation Alert” detailing the problems and urged a rollback of tariffs and other supply impediments.

“Today’s figures show most states are still far from recovering the construction jobs lost a year ago,” Ken Simonson, AGC chief economist says. “The overall economy is recovering, but huge price spikes and ever-lengthening delivery times threaten to set construction back further.”

The association’s new inflation alert documents a wide variety of materials undergoing steep and frequent price increases and delivery delays, Simonson notes. This combination threatens to hold up the start or completion of numerous projects and add to the downward pressure on construction employment, the economist warns.

Seasonally adjusted construction employment in February 2021 was lower than in February 2020—the last month before the pandemic forced many contractors to suspend work—in 44 states and the District of Columbia. Texas lost the most construction jobs over the period (-56,400 jobs or -7.2 percent), followed by New York (-41,100 jobs, -10.1 percent), California (-35,000 jobs, -3.8 percent), Louisiana (-20,400 jobs, -14.9 percent), and New Jersey (-18,200 jobs, -11.1 percent). Louisiana experienced the largest percentage loss, followed by Wyoming (-14.0 percent, -3,200 jobs), New Jersey, New York, and West Virginia (-9.3 percent, -3,100 jobs).

Only six states added construction jobs from February 2020 to February 2021. Utah added the most jobs (6,700 jobs, 5.9 percent), trailed by Idaho (4,500 jobs, 8.2 percent) and Arkansas (900 jobs, 1.7 percent). Idaho added the highest percentage, followed by Utah and Arkansas.

From January to February, 35 states lost construction jobs, 11 states added jobs, and there was no change in D.C., Idaho, Oregon, Rhode Island and Vermont. New York had the largest loss of construction jobs for the month (-15,600 jobs or -4.1 percent), followed by Indiana (-6,100 jobs, -4.1 percent), Illinois (-5,600 jobs, -2.6 percent) and Iowa (-5,500 jobs, -6.9 percent). Iowa had the largest percentage decline, followed by Kansas (-4.9 percent, -3,100 jobs), New York and Indiana. Utah added the most construction jobs and the highest percentage over the month (3,000 jobs, 2.5 percent), followed by South Carolina (2,200 jobs, 2.1 percent).

Association officials called on the Biden administration to roll back tariffs on a range of key construction materials, including lumber and steel, that are contributing to the price spikes. They also urged the administration and Congress to work together to find ways to ease shipping delays that are undermining established supply chains. This could include providing temporary hours-of-service relief and looking at ways to expand port capacity.

“The coronavirus has wreaked havoc on many supply chains, but some of the price increases are the result of misguided policy decisions, including tariffs,” AGC CEO Stephen E. Sandherr says. “Cutting tariffs and addressing shipping delays will give a needed boost to many firms struggling to get back to pre-pandemic business and employment levels.”

The association's Construction Inflation Alert is available online.