Labor & Material Analysis – Q2 2021

As the first half of 2021 has concluded, we are seeing increased confidence and demand in the construction market. However, materials prices remain above their pre COVID levels and availability of materials continue to be a challenge. In addition, the pace of vaccinations has decreased while concerns of the Delta strain of the virus has the attention of the nation.

The second quarter of 2021 has been positive for confidence in the construction industry. The upward trend has continued and grown stronger at a 17-point increase. This level on confidence is the highest we’ve seen since the third quarter of 2018.

Although there is a one month reduction in employment, construction employment has increased over the last 12 months.

The stock market continues to climb at a steady pace with occasional dips.

Inflation in construction is higher than the national average due to reduced or stalled production during COVID. This challenge was further compounded by demand for material increased especially in the residential market.

Unemployment has continued its downward trajectory. Unfortunately, the employment recovery appears to be leveling off. Many jobs in the service industry have not and may not recover fully in the near future. 

CONSIDERATIONS

Positives:

• Stock market gains continued from Q1 2021
• Unemployment appears to have stabilized

Negatives:

• Concerns in portions of the country over the Delta strain COVID variant
• Material shortages continue
• Skilled labor shortages continue
• Inflation is an issue and will potentially rise

Summary Opinion:

We continue to believe that the remainder of 2021 would be an advantageous time to plan for a project. However, due to continuing material availability and inflationary forces, it might make sense to wait to move the start of construction until approximately Q2 of 2022.

At that time, we believe the supply and demand for construction material and labor will be normalized. In addition, we will have a better idea whether the spike in inflation will subside. Projects being planned over the next nine months will be in a better position to time the market in 2022 for bidding and eventual construction.

Nathan Bernier