The construction industry is increasingly aware of the power of connecting the field to the back office through innovative software management systems that enable everyone to work off of the same unified data in real time. The benefits have been well documented—from more easily tracking labor hours, purchasing orders and materials to simplified invoicing and billing—and are increasingly used by contractors of all sizes, particularly as the pandemic necessitated the need for remote, digital integration to maintain business continuity.
What isn’t as readily tracked or understood is aggregated industry benchmark data, perhaps because it isn’t always distributed and analyzed in a way that’s easily accessible for contractors. The Associated Builders & Contractors, AIA and Dodge Data and Analytics all regularly publish reports on indicators including construction spending, backlog rates and a confidence index, as do governing bodies including the U.S. Census Bureau and the U.S. Bureau of Labor Statistics, which track labor and the rate of employment. But few private companies share the data submitted directly from their customer base, which can often be the most telling since it’s personally inputted and used for everything from labor invoicing and client billing to project completion and handover.
Viewpoint, a Trimble company, publishes a Quarterly Construction Metrics Index. The metrics, which explore trends related to job creation, project stats and contract values, are designed to provide early directional information to help industry leaders understand the current construction landscape and assess how their own companies are tracking against averages. But why should contractors care about industry averages, and how can they really use them to the benefit of their businesses?
The Power of Aggregated Data
As the COVID-19 pandemic has shown, no one is immune to their surroundings, and the world is more interconnected than ever before. When a major event happens, it impacts all aspects of the supply chain from labor to materials to consumer confidence. What happens in Tacoma, Wash. can negatively impact contractors in Shanghai and vice versa.
That’s why it’s vital for contractors to continuously scan the landscape and survey their surroundings, which is where aggregated data comes in. It provides the context necessary to understand what’s happening in the marketplace to help inform and guide short and long-term decision making—whether that’s to optimistically ramp up production or hold steady during a volatile climate. While it will always be tricky to know exactly what to track and how best to read through the lines, below are a few high-level metrics uncovered in the first Quarterly Construction Metrics Index, along with analysis on what they mean for the industry looking ahead to 2021 and beyond.
Hiring was Down, But It Followed a Banner Year of Growth
When the books closed in December 2020, hiring had officially dropped 30% year over year. This is significant; however, it’s worth noting that 2019 was a banner year for the industry with hiring up 13% as compared to 2018. This is confirmed by the Bureau of Labor Statistics, which similarly recorded a huge employment drop in March, followed by a slow rebound throughout the rest of the year.
Interestingly, heavy highway and general contractors experienced hiring declines throughout the year, yet specialty contractors maintained net positive employment, which could be attributed to their ability to do projects backlogged by general contractors and/or routine service/maintenance work. This could signal a strong year ahead for specialty contractors who naturally have more flexibility in the type and range of work they can perform.
Hiring Varied Widely by Geography
Every region’s net hiring was down when looked at in aggregate for 2020, particularly for the fourth quarter; however, hiring differed widely by region depending on when the pandemic surged throughout the United States. The most notable region was the Northeast, which experienced a sharp decline in March and then rebounded throughout the rest of the year as the region adapted to the pandemic.
As the Northeast recovered, most of the rest of the country experienced negative hiring growth as the pandemic disrupted business, particularly in the Plains, Midwest and Southeast regions, proving that with the proper health and safety precautions, a rebound is possible. State-by-state data and national data is available from the U.S. Department of Labor, Bureau of Labor Statistics.
Delayed Projects Reflected Ongoing Business Uncertainty
Pending projects, which is when a project is logged in the system but not yet completed, stayed well below average in the spring and summer, which are typically the busiest seasons for construction. This indicates that contractors held back on starting new projects due to the pandemic and the uncertainty of the business climate. In the fall and winter, pending projects continued to decline, ending the year with a year-over-year decline of 30%. While this appears severe, overall projects were only down 5% as compared to 2019, which saw a 16% increase in projects as compared to 2018.
Contract Value Declined, Followed by Hiring and Project Declines
Contract values were also down year-over-year by 25%, coinciding with the declines seen in hiring trends and project starts, which extended to all three verticals, with general contractors experiencing the sharpest decline of 36% year-over-year. Heavy highway contract values followed with a decline of 30% year-over-year, followed by specialty contractors who were down 18% year-over-year. Here again, specialty contractors fared better than the other verticals, likely because of their ability to take on smaller jobs and/or perform service work.
It’s worth noting that data from the U.S. Census Bureau indicates that construction spending has seen a strong rebound since March 2020, with a 5.7% increase in December 2020 as compared to December 2019. The overall value of construction in 2020 was $1,429.7 billion or 4.7% above the $1,365.1 billion spent in 2019.
What’s Next?
Contractors that had to reduce staff, seen projects delayed or had contract values decline should know they’re not alone. The numbers clearly demonstrate that 2020 was unprecedented, affecting industries all across the globe. However, with a new year comes new opportunities both with global vaccine distribution and the potential for a large-scale infrastructure bill from the newly-elected Biden administration. Many are hopeful that it will provide some much-needed investment and stability for the industry, helping to employ workers and start projects that will have a long-term positive impact on the nation’s infrastructure.
