Cause of More Construction Job Losses in August More Serious than COVID-19 Delta?

Loss of 3,000 jobs accompanied by declining construction unemployment suggest labor costs will continue to rise as the industry’s workforce contracts and restricted material and skilled-labor supply dampen demand for projects

Construction employment in the pandemic era peaked in March and has drifted down consistently since June.
Construction employment in the pandemic era peaked in March and has drifted down consistently since June.
U.S. Bureau of Labor Statistics

The construction industry lost 3,000 jobs on net in August, according to an Associated Builders and Contractors analysis of data released today by the U.S. Bureau of Labor Statistics. The industry has recovered 881,000 (79.2%) of the jobs lost during earlier stages of the pandemic.

Nonresidential construction employment declined by 20,300 positions on net, with all three subcategories registering losses for the month:

  • Nonresidential specialty trade contractors: -9,200 jobs
  • Heavy and civil engineering: -8,300 jobs
  • Nonresidential building employment: -2,800 jobs

The construction unemployment rate fell sharply to 4.6% in August. Unemployment across all industries declined from 5.4% in July to 5.2% last month.

“Many observers will simply attribute today’s extraordinarily disappointing employment report to the malicious impacts of the delta variant,” said Associated Builders and Contractors Chief Economist Anirban Basu. “While the ongoing pandemic clearly had an impact on employment in segments such as retail, lodging and restaurants in August by suppressing demand for additional workers, construction employment dynamics were more affected by ongoing supply-side bottlenecks.

“Collectively, nonresidential contractors exhibited significant confidence in the past few months,” said Basu. “In general, positive expectations have gone unmet, at least thus far. Industry participants had anticipated rising employment during the back half of 2021, according to ABC’s Construction Confidence Index, but nonresidential employment declined by more than 20,000 positions in August.”

The Associated General Contractors of America released this week results of the 2021 edition of its annual Workforce Survey. The project, supported by Autodesk, measured key aspects the unique twisting of conventional construction economy/employment dynamics in pandemic environment.

“This year’s results show an odd paradox,” said Stephen Sandherr, CEO at AGC, in remarks prepared for the data release. “On the one hand, construction firms are experiencing pre-pandemic levels of workforce shortages. At the same time, many construction firms are dealing with the impacts of delayed or canceled projects, suffering from construction materials shortages, delivery delays and lagging demand.”

AGC Chief Economist Ken Simonson summarized significant results:

  • Nearly nine out of ten firms are experiencing project delays
  • 75% cite delays due to longer lead times or shortages of materials
  • 57% cite material delivery delays
  • 61% of firms said their projects are delayed by workforce shortages among their own teams or those of their subcontractors

“As a result of all these challenges, more than half of firms report having projects canceled, postponed or scaled back due to increasing costs,” said Simonson. “Twenty-six percent report their projects have been delayed or canceled because of lengthening or uncertain completion times and 22% say changing market conditions have led to project delays or cancelations.

“What is truly unnerving is that despite the loss of industry jobs in August, the construction unemployment rate actually declined from 6.1% in July to 4.6% last month,” said Basu. “The implication is that the construction workforce is not expanding. This opens up the possibility that labor costs could continue to rise rapidly even if industry momentum softens further. Furthermore, with the delta variant causing additional supply chain disruptions in Asia and elsewhere, materials prices may not decline as rapidly as had been hoped. This potentially sets the stage for waning industry momentum as 2022 approaches.

“The good news is that today’s weak employment numbers will likely help keep interest rates lower for a lengthier period.”

State Rankings by 17-month Change in Construction Employment (as of July, Associated General Contractors of America)

AGC looks for a relatively short timeline for construction employment issues to begin to subside.

“Today, largely because of the pandemic, construction firms are worried about finding enough work even as they struggle to find enough workers,” said Sandherr. “The good news is that many of the challenges affecting contractors are being driven by the pandemic and policy responses to it, instead of typical market conditions. Once the pandemic wanes and policies that have kept people from seeking employment expire, demand for construction is sure to rebound and the labor pool is likely to expand.”

A significant portion of contractors surveyed in AGC’s workforce study anticipate a harrowing ride in the near term before a return to anything like “normal” business.

“These challenges (material and labor supply leading to project cancellations) are a key reason why 26% of respondents expect it will take more than six months for their firm’s revenue to match or exceed year-earlier levels,” said Simonson, “And 17% are unsure when to expect a return to previous demand levels.”

But workforce-related project delays are not limited to lack of new hires. Nearly half of construction professionals were unwilling to be vaccinated against COVID-19. Now, many construction workers are absent from the job site because of either illness or the rising delta variant threat.

The number of construction workers out sick with the disease has “definitely picked up again from the Delta variant,” Travis Mross, executive vice president of operations at Zachry Construction in San Antonio, told In early August, Zachry quarantined about a dozen workers from a TxDOT bridge replacement project.

“You’ve got a lot of qualified, skilled craft workers who can’t work or won’t work because they’re not vaccinated, and they’re getting sick,” Brian Turmail, vice president of public affairs for AGC, told “Or they’re worried about getting sick and transmitting it to other unvaccinated people. Or they’re vaccinated, but they have young children who aren’t vaccinated.”