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RISING PRICES PERSIST AS SPENDING LEVELS OFF
Ukraine, China, and other Factors Keep Costs Elevated
The economic recoveries in the U.S. and Canada continue despite circumstances characterized by stubbornly elevated inflationary pressures, brutal war, and ongoing COVID-19 inspired lockdowns.
However, the paths that construction is following in the two nations has begun to diverge. The U.S. construction industry added 36,000 net new jobs in May representing nearly 10 percent of all jobs added across all industries in America that month. In Canada, construction lost 3,000 positions on net even as the broader economy added nearly 40,000 jobs for the month. The unemployment rate in the U.S. remained unchanged at 3.6 percent, while unemployment in Canada dipped slightly to 5.1 percent, which is extraordinarily low by Canadian standards.
Over the last 25 months (since the start of the economy recovery in May 2020), the U.S. construction industry has recovered all the jobs lost due to the pandemic. As of May 2022, there are 40,000 more construction jobs than there were in February 2020, the month before the pandemic produced large-scale economic lockdowns. In Canada, there are 24,000 more construction jobs over the same time period, which proportionately speaking represents far superior performance.
Both nations have been broadly characterized by the following dynamic—while the cost of delivering construction services has skyrocketed in the context of atmospheric materials prices and strained labor market capacity, for the most part contactors have been able to pass those cost increases along to project owners. However, with the risk of recession elevated and borrowing costs rising rapidly, the question becomes whether project owners will become more resistant to higher delivery charges. It is also possible that more projects will be delayed or cancelled in the context of weaker economic performance, rising cost of capital, and unusually elevated construction costs.
Click here to download this month’s full economic update
(which includes updates on: factors keeping costs elevated, construction spending dips, inflation and economic overviews for the U.S. and Canada.)