Our View: A Look Back at 2021 and a Look Ahead at 2022 for the U.S. Construction Industry

Our view: A look back at 2021 and a look ahead at 2022 in the U.S. construction industry.

This year is nearly in the books, and by all accounts, it's been a challenging year for construction as it has been for many industries. So here's our look back at 2021 and look ahead to 2022.

Looking back at 2021, the best response seems to be, “at least it’s not 2020.” U.S. businesses did try to get back to some sense of normalcy in 2021, but as we look back, and as always look ahead (those schedules don’t ease up, do they?) it’s been a challenging year for construction to say the least. Labor shortages, material supply issues and price hikes, demand fluctuations, and market uncertainty driven by lingering pandemic-related fallout, all conflated into a hornets’ nest of unpredictability. For some small builders and contractors, 2021 presented just too many challenges to continue. But, if you were fortunate enough to stay busy and stay afloat, then our hardhats are off to you. And as we look ahead to 2022, new and lingering challenges remain.

Labor shortages, especially skilled trade workers, plagued construction productivity, and there is still no end in sight. In addition, 2021 was the year of the “Great Resignation,” with many people choosing to stay home or find new employment after workplaces reopened and began to normalize. As a result, the first half of 2021 saw labor growth in construction stagnate. However, according to current information from the Federal Reserve Economic Data (FRED), labor participation rose in the second half of the year. The final construction employment figures have been released for the last quarter and show a steady increase in workers. In some markets, construction labor has fully recovered, while in others, it remains well below pre-pandemic levels. This disparity is generally due to some regions lifting COVID restrictions faster than others.

We started the year with significant material and supply challenges, including a spike in the price of lumber. In addition, as of October, the 12-month producer price index for steel mill products was up 141.6%, according to the U.S. Bureau of Labor Statistics. The exact cause of these increases varied by commodity, but they generally resulted from skyrocketing demand and constrained supply. As of now, eased pandemic restrictions mean that demand has recovered much faster than suppliers can produce. As a result, prices are stabilizing as the year is drawing to a close and are predicted to begin declining early next year. But any improvement in pricing will rely on factors such as the supply chain crisis easing and interest rate hikes from the Fed.

2021 also brought a roller coaster of demand peaks and valleys, starts, and stops. Ultimately, the overall U.S. construction industry is up for 2021 but is not yet back to pre-pandemic levels. Residential construction has been a shining star throughout 2021 and remains a driving factor in many markets, especially after more than a year of remote work. Demand for housing is at historic levels. Other construction sectors have been slower to come back online. However, as 2021 winds down and more businesses reopen, pre-pandemic trends look to resume.

Two widely publicized COVID variants, Delta and the more-recently reported Omicron have added uncertainty and anxiety into daily life and have certainly impacted the construction industry. The Delta variant upended many markets and re-ignited fears of another lockdown. With Omicron, it appears more lockdowns may not be off the table but may not be as stringent as before, especially in areas with high vaccination rates. Some states are returning to indoor mask mandates, while others are actually easing restrictions. Unfortunately, the mixed messages and lack of clarity produce more market uncertainty.

So, what does 2022 have in store for construction?

According to Engineering News-Record (ENR), 2022 looks to be a positive year for the U.S. Construction Industry. Anirban Basu, chief economist for Associated Builders and Contractors and CEO of consulting firm Sage Policy Group, shared his economic forecast for the industry during a webinar for ABC’s Construction Executive on December 8th. According to Basu, 2022 will see significant growth in city and state construction spending, which is on top of any infrastructure bill spending. Consulting firm PWC’s Engineering & Construction outlook for 2022 is cautiously optimistic as well. According to a 
recent article from the firm, “The E&C sector is well-positioned for strong activity in 2022 despite the continued impact on margins by global supply-chain disruptions, rising material input costs, and labor shortages.”

Of course, with inflation concerns rising, the Producer Price Index (PPI) at a historic high, and the midterm elections, creating and sustaining growth for your construction business in 2022 is anything but a certainty. 

What can your construction business do now to prepare?

No matter what 2022 has in store for the construction industry, a few key takeaways from the belt-tightening and uncertainty over the past couple of years will remain.

  1. Watch your margins carefully. The old saying that volume or revenue hides all sins may be true, but continuing to operate at sub-optimal profit margins will hurt your business in the long run. But, of course, the most significant factor will be having the financial resources readily available to capture opportunities. If you’re running so lean that you can’t pounce on opportunities that come your way in 2022, then your growth may be lagging.
  2. Always be recruiting. Finding and keeping the right people for your business will get more challenging. Skilled tradespeople are in high demand. Understand how your employment opportunities stack up against not only your competitors but against unrelated industries where worker conditions, pay, benefits, and opportunities are far better than construction.
  3. Tighten down your business processes. Many businesses leave money on the table every day because of poor operating practices. Inadequate employee training, unclear communication, and non-existent business processes can cost you time and money day in and day out. And while running projects that are on fire or coming unglued, putting new practices in place that take hold and make a difference to your bottom line is a challenge. So, use any downtime to reorganize, streamline, and optimize your processes. Start simply. Create an organizational chart with assigned responsibilities. By understanding and reporting on your company’s hierarchy and responsibilities, you can cut down on unnecessary emails, phone calls, and a lot of uncertainty in decision making.

To prepare your construction business to take advantage of every opportunity 2022 brings and beyond, we recommend our construction management software, CMPRO™.

CMPRO helps you manage your in-office and on-site construction management teams with real-time access to pertinent project information, saving time and money on every project.

CMPRO was designed and built with decades of construction management experience. We have focused that expertise on the product features your construction managers need to lower costs and increase productivity. 

CMPRO is simple to learn and master, increasing the likelihood your team will use it every day to document and report on all critical aspects of the project. And because CMPRO is so easy to learn and use, it reduces the cost of the training required to bring new people on board.

CMPRO helps your on-site and in-office construction management teams manage mission-critical elements of every construction project, including:

  • Budgets
  • Forecasting
  • Pay Applications
  • Pay Periods
  • Change Orders
  • Vendor Contracts

For your 
job-site team specifically, CMPRO has equally robust construction project management features, including: 

  • Daily Logs
  • Meetings
  • Plans
  • Punch Lists
  • RFIs (Requests for Information)
  • Submittals
  • Transmittals
  • Purchase Orders (Coming Soon!)

Find out how 
CMPRO™ can help improve project communication by simplifying your tracking, documentation, and reporting processes throughout your entire team. To find out more and schedule a demo, visit us online, or contact us at [email protected].

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Ready for a Construction Management Software Solution that’s easy for your team to learn and use every day and doesn’t break the budget? To schedule a demo of CMPRO™ Construction Management Software, contact us today at [email protected], or by using our simple contact form. We’ll get in touch right away.

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