A boom in the construction of industrial plants, infrastructure, and other non-residential projects is offsetting the decline in home building in the United States, a market currently weakened by the burden of higher interest rates.
Contractors say that spending on non-residential projects has remained strong despite high borrowing costs, which typically raise the cost of financing construction.
Non-residential construction spending in February totaled $982 billion, nearly 17% more than the previous year, according to the U.S. Census.
This sector is particularly hot due to the construction of new factories for electric vehicles, warehouses for e-commerce, and manufacturers that have decided to bring jobs back to the U.S. after global supply chains broke down during the pandemic. Spending on manufacturing construction last year was the highest ever recorded, according to the Census Bureau. Increased federal spending on public works projects, defense, and the production of batteries for electric vehicles and semiconductor chips is expected to keep construction activity high in the coming year, experts in the field believe.
There are construction companies with schedules filled until 2024 that are saying no to new clients. The main reason is the lack of labor.
About one-fifth of construction workers are over 55 years old and are generally the most skilled workers on a job site. As older, more skilled workers retire or move on to other jobs, many contractors are unable to quickly replace them with younger workers with the same skills.
The number of carpenters in the construction industry increased by 4% in 2022 compared to 2021, according to the Bureau of Labor Statistics. Electricians increased by nearly 9% last year. Even with these increases, the number of carpenters remained below pre-pandemic levels in 2019, the agency said.
The number of workers in non-residential construction in the U.S. increased by 3.3%, or 149,100 workers, in March compared to the same month last year, according to the Bureau of Labor Statistics. Contractors have been increasing the hiring of entry-level workers in an attempt to offset the labor shortage. The number of workers hired last year was 8.6% higher than in 2019.
These newer workers are contributing to greater delays and projects taking longer to complete because they are typically less productive than the older, more skilled workers they are succeeding.
Source: The Wall Street Journal