Construction Small Business Pulse July 2021

The US Census Bureau’s Small Business Pulse Survey (SBPS) has been active since April 2020 in an effort to track changes in business conditions during the ongoing COVID-19 pandemic. Each month, Levelset will be taking a look at key issues for the industry, as illustrated by the data of the SBPS.

US contractors see a path forward, upcoming recovery from the pandemic

Despite the difficulties seen by the construction industry during the past year, a significant number of contractors see a path forward in the near future. 

62.64% of respondents to the Small Business Pulse Survey from May 31, 2021, to July 4, 2021, noted that they believe their business has returned to its normal level of operations or will do so within the next six months.

“We think there are encouraging signs out there for recovery, generally, and this is an industry that’s poised to help drive recovery,” says Associated General Contractors of America New York State Chapter President and CEO Mike Elmendorf. “And we hope that’s going to mean job recovery for the construction industry, and not only getting back those construction jobs that were lost, but growing, growing beyond that.”

When compared to the prior year, the number of contractors who have seen a return of what they consider their normal business operations has been significant.

In week seven of the SBPS Phase 5 survey — which covered June 28, 2021, to July 4, 2021 — 22.7% of respondents believed they had returned to their normal level of business operations. In week seven of the survey’s Phase 1 — covering June 7-13, 2020 — 0% of respondents felt this was the case.

There are a number of contributing factors to this, but a major aspect is the high level of demand that the industry has seen throughout the pandemic. As public health issues have been slightly mitigated by rising vaccination rollout, contractors are now working to get back to the levels of work that can satiate the growing demand.

“We are in the midst of a busy construction season,” added Tim Burkman, who works with the city of Grand Rapids, Michigan’s Engineering Department.

“I feel like the demand will continue to be strong,” said Spen Custis, a division president for Virginia homebuilder Eastwood Homes. “The challenges for us now are more about making sure we can build…in a timely manner.”

Possibly stemming from this demand, contractors are certainly feeling more positive effects on operations. 38.2% of respondents in week seven of the SBPS Phase 5 survey noted that the pandemic either had little to no effect or positive effects on their business — a decent rise from the 23.3% of respondents who said the same in week seven of the Phase 1 survey.

Contractors are trying to adapt to worker’s needs, provide education to fuel workforce revitalization

As many have noted, construction employment fell significantly in 2020. For example, prior to the pandemic, the construction sector in New York State reached a record 406,600 jobs, but that number fell by nearly 11% last year to reach 362,200 jobs, according to a June report from state Comptroller Tom DiNapoli.

“Over the past year, since May of 2020 until now, non-residential construction employment has kind of bumped along, and the industry as a whole is still down over 250,000 jobs,” said Ken Simonson, chief economist for Associated General Contractors of America.

“Ours is an industry that, pre-pandemic, had workforce shortages…really across the country,” said Elmendorf.

Employers have had a difficult balance with this over the course of the summer. From May 31, 2021, to July 4, 2021, an average of 11.04% of respondents said that they had had an increase in the number of paid employees at their business. However, during that same period, an average of 10.7% of respondents said that the number of paid employees at their business had actually decreased.

“Post-pandemic, we have workforce shortages. So, it’s sort of hard to wrap your head around the fact that you had that many job losses, yet you still have contractors that are having trouble finding [a] workforce,” Elmendorf continued.

Local business owners have had to reconsider the ways in which they treat their employees and bring new workers in. The needs of the workforce have shifted, taking some out of construction, but demand climbing to record highs has business owners reconsidering how they can attract and retain workers.

“We’re losing more people than we’re bringing into the industry,” added Matthew Schimenti, owner of New York’s Schimenti Construction Company. “People made decisions in their lives to leave the region and the industry [during the pandemic]. It was like putting a puzzle back together to restart where we literally called a timeout.”

“The phone is ringing off the hook,” said Matthew Messer, owner of New York Solar Maintenance. “I am expanding [our operations] as quickly as I can, but right now that’s governed by the amount of skilled technicians I can bring on.”

Some owners are looking to increase salaries in order to fuel hiring, especially when it comes to skilled positions.

“I was offering $18-$22 an hour and I got no applications. I increased it to $23 and I got none. I increased it to $25 and they’re starting to trickle in right now,” Messer added. “It was a dramatic increase, but in order to grow the business, I need technicians.”

Some businesses have had success with expanding their workforce, though, others are still struggling with employees’ hours. From May 31, 2021, to July 4, 2021, an average of 10.6% of respondents noted that they had increased the total number of hours worked by employees — but 14.16% said that they had had to decrease workers’ hours.

Labor organizations have noted the importance of multi-skilled positions as well when it comes to workforce expansion, and major leaders are working to make sure that workers are prepared for the shifts that will be accompanied by a post-pandemic workforce.

“If you have the desire to learn multiple crafts, we’ll teach you multiple crafts,” said Michael Bellaman, President and CEO of Associated Builders and Contractors. “Our members invested $1.3 billion last year in upskilling their existing workforce.”

“We want to go out to every area where we can attract top talent. Once we get them into the industry, we’re educating and upskilling,” Bellaman said.

Bellaman notes that, as innovation becomes a focus of the construction industry, the workforce will continue to shift and reflect the changes — hopefully opening up new avenues for workers.

“The industry is using technology and innovation to basically handle this disruption with regards to the labor shortage. A lot of use of drones, robotics, and additive manufacturing,” Bellaman said.

“That, though, creates new career opportunities in those innovation and technology spaces. And that’s very attractive to the younger generation.”

Supply shortages continue to concern business owners

In the June edition of Levelset’s Construction Pulse coverage, data from respondents showed that supply shortages were a major issue in the construction industry. 59.7% of respondents reported domestic supplier delays during the period of May 24-30, 2021, with 19.1% of respondents also dealing with foreign supplier delays.

Unfortunately, the month of June and beginning of July didn’t do much to alleviate these issues. From May 31, 2021, to July 4, 2021, an average of 58.8% survey respondents noted domestic supplier issues, with an average of 18.7% experiencing foreign supplier delays during the same period. 

“Construction contractors are continuing to lose money because of this jump in materials costs,” Ken Simonson said of continuing issues with the supply chain. “Materials costs have gone up 24% over the last year, while bid prices for new construction work have only risen about 2.8%.”

Speaking of a shortage in lumber used for oak flooring, Richmond, Virginia-based remodeler Steven Roberts — owner of Virginia Tradition Builders, LLC — noted that his company’s necessary materials are “hard to come by” during this difficult period.

Roberts needs specific types of oak hardwood flooring, saying that “It is very common in many older homes that we remodel,” — however, as he continued, the prices have gotten out of hand. “It has gone up at least 20% to 25% in cost this year.”

This isn’t the first time that shortages have affected Roberts’ business.

“There was a water heater shortage in February and March because so many homes in Texas had frozen water heaters,” Roberts said. “There are some paint shortages going on now. Some of the ingredients in paint were stored in warehouses down there and those were ruined.”

As specific parts of the supply chain are impacted by the pandemic, weather disasters, and other hindrances, contractors are still struggling to find alternative methods of distribution. From May 31, 2021, to July 4, 2021, an average of 32.24% of survey respondents noted difficulties locating alternative domestic suppliers — barely a change from the 32.6% of respondents who noted the same problems from May 24–30, 2021.

“The prices are just killing you,” said Tinh Phan, founder of Virgina-based construction contractor PNC Companies, about the rising prices for materials. “The cost of windows and lumber just skyrocketed. We are just going to have to continue to do things to survive.”

“It definitely has been a challenging market,” said Debbie Stoddard, a co-owner and vice president of Virginia’s Finer Homes Inc. “The hardest thing we are facing is with some of the shortages. You don’t know when things are going to hit you. Heat pump units have been delayed to our heating contractor on some houses. You have to have the heat in the house to acclimate the hardwood floors. Everything starts getting backed up. That is what everybody has been experiencing.”

However, contractors are hoping that communication with consumers will help mitigate the issues stemming from the shortages. “Luckily, our buyers have been very patient,” Stoddard said.