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(or read on for an excerpt from this month’s economic intel)
PANDEMIC LINGERS, GROWTH CONTINUES
It’s the Beginning of the End
Beginning in about May 2020, the North American economy began to rally from the devastating impacts of the pandemic’s early-stage commercial blows. Coming into the pandemic, the U.S. unemployment rate was 3.5 percent. By April 2020, it was approaching 15 percent. Canadian unemployment was 5.7 percent at pandemic eve. It would soon surge to above 13 percent.
That was then. Both nations have experienced rapid recovery during the past two years. As of March 2020, total employment in Canada was 2.4 percent higher than it was in February 2020. While America has yet to fully recover its pre-pandemic employment (down 1.2 million jobs since February 2020), the unemployment rate has dipped to 3.6 percent. The Canadian unemployment rate, which recently declined to 5.2 percent, represents the lowest level since monitoring commenced in 1976. The North America construction industry has also rebounded. From May 2020 through April 2022, American construction added 1.1 million jobs on net. In Canada, 2021 construction levels were above 2019’s levels.
But construction employment would have risen even further in both nations were there more workers available to hire. Many firms report operating at capacity and continue to desperately seek new sources of human capital. In the U.S., there are nearly 400,000 available, unfilled job openings. Construction firms can’t offer as much flexibility as many other industries (e.g., remote work, flexible hours), and contractors accordingly raise compensation as the primary mechanism by which to recruit and retain. That helps explain why construction compensation has been rising at its highest level in 40 years in the U.S.
The pressure to pay workers more will persist. With consumer inflation running at more than 8 percent in the U.S. on a year-over-year basis and nearly 7 percent in Canada, workers will expect and request significant raises in 2022. With materials prices racing higher, in part because of the Russian assault on Ukrainian democracy, contractors will need to aggressively pass along cost increases to project owners. The question becomes whether the economy will remain strong enough to allow that.
Click here to download this month’s full economic update
(which includes updates on: nonresidential spending, economic outlook, economic quick takes, and U.S. & Canadian construction industry overviews)