AGC CONSTRUCTION FORECAST


Optimism High But Forecast Mixed for California Construction Industry, According to AGC Chief Economist


By Carol Eaton F


ollowing a year of pandemic- driven job losses and widespread slowdowns in most nonresidential


construction sectors, AGC of Califor- nia’s 2021 Industry Optimism survey (highlighted on facing page) found that California contractors are generally optimistic that their revenues, net profits and hiring will grow in 2021 and beyond. AGC of America Chief Economist


Ken Simonson highlighted the positive results from the recent California survey while also delving into an array of national data showing a decidedly mixed construction industry forecast during an April 1 webinar, “Te Post Pandemic Outlook for U.S. and California Construction.”


California Contractors Weigh In Kicking off the webinar with key


findings from the AGC of California survey entitled “What’s Driving Califor- nia’s Construction Industry Optimism in 2021?”, Simonson pointed out that about two-thirds of contractors surveyed said construction overall is going to expand or stay the same in 2021. Similarly, over three-quarters projected hiring will stay the same or increase compared to 2020. “Tat’s quite impressive given the struggle that many contractors and owners have experienced in the last 13 months,” he said. Te top concerns cited by California


contractors – the workforce pipeline development, COVID-19 regulations, health and safety, and the economic impacts/financial impact and project disruptions and delays – are “very consistent with what we are seeing nationally,” Simonson added. He provided a summary of the


biggest impacts from the COVID-19 pandemic to date. Topping the list, the


20 July/August 2021


industry saw a huge job loss – totaling 1.1 million (construction) jobs – from February to April of 2020; that was followed by a rebound of 805,000 jobs from April 2020 to February 2021, according to the Bureau of Labor Statistics. Residential construction was the big winner, reclaiming 100% of its job losses, while nonresidential got back just 51% in that time period. Fast rising materials costs, delivery delays, higher onsite costs, fewer new project announcements and project cancellations all continue to have major impacts on the industry. “As a result of all these situa-


tions, over one-third of contractors nationwide reduced their head count in the last 12 months,” Simonson said, with just one-fifth increasing their head count. “Even so companies are optimistic. Five times as many of you say you will increase your head count in the coming 12 months as said you would decrease it.”


National Survey Reflects Pandemic’s Impacts


Simonson also highlighted the


results of a recent AGC of America national survey that polled about 1,500 construction industry firms from February 19 to March 4, 2021. Tree- quarters of respondents said they had projects either postponed or canceled within the last year, and the number of new projects is staying at a “very low level,” Simonson said; only one-third of firms saying their business is back to year ago levels. Another one-third of respon- dents said it will take more than six months before they expect to get back to their pre-pandemic levels of business. His own take on the numbers?


“It is going to take longer,” Simonson predicted. “Even though the economy seems to be growing and hopefully we will avoid another setback, further


outbreak of coronavirus variants may cause some retrenchment. Once the economy gets going, construction is still going to lag.”


Mixed Projections for Construction Spending


Year-to-date construction spending


was down in virtually every nonresi- dential market sector from January/ February 2021 compared to the same period last year, topped by a 25% decrease in lodging, 12% decline in manufacturing, 9% decrease in power, and 8% decline in commercial. Simonson predicted the best project prospects currently are for any kind of remodeling work, certain types of distri- bution centers, data centers, selected niches in manufacturing and healthcare (particularly special care facilities) and the K-12 market, on the public side. An overall trend towards slowing


population growth in the U.S. was apparent in California last year, when the state officially experienced its first population decline in at least 120 years (down 0.2% from July 2019 to July 2020, according to the U.S. Census Bureau). Several states picked up the slack, with population increases led by Idaho (2.1%), Arizona (1.8%), Nevada (1.5%), Utah (1.5%), and Texas (1.3%).


AGC Takes Action AGC has been taking action at the


national, state and local levels to address ongoing impacts to the industry from rising material costs and supply chain issues. Tis included recently issuing an AGC Alert on construction inflation, an April 14 webinar on rising costs and delays, lobbying the federal government for tariff relief on lumber, steel and other products, and various other actions. Visit AGC of America at www.


agc.org or AGC of California at www. agc-ca.org for ongoing updates. n


California Constructor


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