January 20th, 2022 will mark two years since the first confirmed case of COVID-19 in the United States. Since then, the word “unprecedented” has become a part of our daily vocabulary. No one knew the impact the pandemic would have on our lives, but nearly two years later, we are still dealing with the fallout in the construction industry. As we bid farewell to 2021, we look back at the impact COVID-19 had on the construction industry and look ahead to how we’ll be affected in the year to come.
Lead Times & Shipping Delays
We are no strangers to lead times and delays from manufacturers and suppliers. Nevertheless, COVID-19 took what was an already fragile system and brought it to a tipping point. The beginning of the pandemic caused massive shutdowns of both worldwide manufacturing plants and local job sites alike. However, when the economy was ready to open up these facilities and logistical companies were ready to ship these goods, the demand was too high to keep up with. Forbes reported that the “port of Los Angeles, the busiest port in the country where 17% of national cargo is received, import volumes increased by 27% in June 2021 vs June 2020.” This large jump in imports, where the industry gets a multitude of materials and tools from, has caused prolonged delays because there’s simply not enough manpower or space to accommodate the influx of shipping.
So what did this mean for the construction industry? We’re sure you’re already aware that the supply chain is completely backed up, causing delays to the distribution of products. Manufacturers aren’t getting the raw materials quick enough, causing lead times to soar. Ultimately, job sites are suffering from extended schedules and not meeting projected deadlines.
Skyrocketing Construction Costs
Supply and demand is a commonly used phrase when it comes to economics. It is a balance between the supply of commodities and the consumer’s inclination to purchase them that regulates market prices. Due to increased shortages in materials and high demand, prices have noticeably swelled. It started with the raw material prices shooting up. This inevitably leads to the logistics companies charging more, and then the manufacturers… You get where this is going.
This past August, the National Association of Home Builders stated, “Despite significant drops in framing lumber prices in recent months, overall building material prices have increased 19.4% during the past 12 months and 13% year to date”. Increased prices all around are affecting companies’ bottom line. As a result, market prices for new homes and products from local distributors have shot up.
Labor in the Construction Industry
It’s no secret COVID-19 heavily impacted the job market. The construction industry in particular, has seen an increased labor shortage. The Association of General Contractors of America conducted a survey which concluded that 89 percent of firms seeking to fill hourly positions and 86 percent of firms seeking to fill salaried positions reported difficulty doing so. In addition, a majority of firms state that the applicants are under-qualified for the positions, which has encouraged companies to increase pay rates and offer hiring bonus incentives. As a result, the lack of qualified employees has made it difficult for contractors to keep up with workload demands and productivity at both job sites and offices.
Looking Ahead
The past two years brought immense change to the construction industry. COVID-19 impacted the supply chain, costs, and labor… and much more. We’ve learned that the economic strength of the construction industry is complex, and all these factors play into one another. For example, the supply chain caused increased prices for imports which passed additional costs to distributors, ultimately raising market prices. In addition, the lack of available qualified staff on job sites further delayed project schedules. We know the issues, so how do we move forward?
There may not be a clear or right path as to how we can see the industry improve, but we can take our knowledge along with predictions from leading health and industry professionals to create an educated speculation of what is to come in 2022.
Previously, COVID-19 cases skyrocketed in the winter months. However, now we know more about COVID-19 and vaccines are readily available. In fact, epidemiologists are optimistic in their predictions for this winter’s reported case numbers. Chris Murray, a leading disease forecaster from the University of Washington, told Reuters that we’ll see a modest increase in the winter and if no new variants break through, we are likely to see an overall decrease come the spring.
Most leading epidemiologists are in agreement that mid to late 2022 is likely when we’ll see a noticeable shift in the pandemic, given no new variants emerge.
On the economic front, we’re still seeing inflated prices and shipping delays. Unemployment is dropping, and consumers are steadily pushing money into the economy. During a CNN interview, Treasury Secretary Janet Yellen said, “On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement by the middle to end of next year.” Although some fear that inflation will remain an issue, Yellen has assured the public that is not the case.
Assuming that the predictions from epidemiologists and the Treasury Secretary are likely to happen, it may be a safe argument that by the end of 2022, we will see a more stable economy along with a drop in COVID-19 cases. The shipping industry should catch up to demands, the job market should move closer to its pre-pandemic state, and the supply and demand for goods will stabilize. For these reasons, Advantage Drafting is optimistic that current issues the construction industry is facing may no longer be as prevalent this time next year.
How has the pandemic affected you or your company over the past two years? Do you share the same outlook going into 2022? Share your experiences and thoughts below!
In light of our optimism, Advantage Drafting is offering a FREE submittal package with your shop drawings. Mention this blog post at the time of ordering your shop drawings before the end of the month and we’ll include the submittal package at no additional cost. Get your next project quoted now! The offer can only be used one time per customer and expires January 31, 2022.
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