This article orignally appeared online with the Minneapolis / St. Paul Business Journal on August 10, 2022 and was written by Ashley Fahey.

Has the construction labor issue gotten better, worse or remained about the same since the pandemic started? What happens in the event of a recession? Below, we've highlighted a few key areas experts have studied to predict if the economy is headed for a recession, how to anticipate workforce shortages, and when IIJA funding will begin to flow.

ARE WE HEADED FOR A RECESSION?
The July jobs report from the Bureau of Labor Statistics found the industry added 32,000 jobs last month, with industry employment increasing by 311,000 jobs, or 4.2%, on an annual basis. But those numbers obscure the fact commercial construction in particular is facing coutervailing forces, based on property type, said Anirban Basi, chairman and CEO of Baltimore-based economic and policy consultant Sage Policy Group and chief economist for the Associated Builders and Contractors.

The sector's unemployment rate was 3.5% in July, on par with national unemployment across all industries and indicative of how tight the market remains.

The ABC's July Construction Confidence Index readings for sales, profit margins and staffing levels, which came out August 9, declined, suggesting a growing pessimism across the construction industry. Indices for sales and staffing remain above a threshold of 50, which indicates members surveyed still expect those metrics to grow in the next six months, but readings for profit-margins are less than 50 for the second consecutive month, according to ABC.

The cost of construction is also continuing to rise. The U.S. national average increase in construction costs in the second quarter was about 2.4% on a quarterly basis, and 7.5% year-over-year, according to Rider Levett Bucknall Ltd., a law firm that specializes in property and construction advisory services.

Basu said he thinks job growth overall will slow, and, specifically in construction, demand will increasingly shift away from private-sector projects to public ones. He'd predicting an economic recession will occur next year, which could start to materially affect the broader construction industry about a year later, given the long lead times on construction projects.

CONSTRUCTION WORKFORCE CONCERNS
A key worry for those who observe, or work within, the construction industry: If the pipeline of projects does start to slow because of a recession, existing workers that suddenly find themselves out of a job may leave the industry and not come back when the cycle picks back up.

That's what's happened in past recessions, perhaps most memorably in the global financial crisis of the late 2000s. It's an issue exacerberated by a retiring skilled workforce in construction, where the average age is now 42.3, according to the Bureau of Labor Statistics, and there are fewer younger workers to replace them.

Retaining and hiring labor has been one of the hotttest topics of the pandemic as workers have altered work and life priorities. More workers than ever before are remote, or have decided to pursue jobs in other industries that'll give them flexibility to wokr at home. Still others, in industries like hospitality, were laid off at the onset of the pandemic and have yet to return. The U.S. labor-force participation rate across all industries was 62.1% in July 2022, below pre-pandemic levels.

Julian Anderson, president of Rider Levett Bucknall, said, anecdtoally, he's also heard fewer people working in the construction are willing to move to follow work. In decades past, it wasn't unusual for construction workers to relocate after a major bridge or road project wrapped up. But with construction so busy across the nation in recent years, and overall attitudes toward work changing, people are more reluctant now to relocate to follow projects, he said.

Fewer immigrants coming to the United States, particularily since the pandemic onset, has also hit the construction workforce more acutely than other sectors.

"There were, I think, quite a few people who worked informally in the construction industry for many years, doing those...labor jobs norbody else wanted to do," Anderson said, citing jobs in the wet trades like painting, drywall and plaster. That's likely to be a persistent headwind for the construction industry. 

DON'T FORGET ABOUT IIJA PROJECTS
Although some government officials are only in the planning stages of potential IIJA-funded infrasturcture projects, Basu said elected officials love to cut ribbons on restored bridges and newly built interstates. With prices in some commodities like fuel and steel already having come down from recent spikes, it's likely more infrasturcutre projects with IIJA funding will begin later this year or in 2023. That'll boost demand and job in publicly funded construction projects, Basu said, at a time when privately funded development may be slowing.

"I'm expecting there will be a recessions --- I don't know how deep or how long, but this money [from IIJA projects and related spending] should help to prop up the construction industry for a good period of time," Anderson continued. 

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Read the full article in the Minneapolis/St. Paul Business Journal here.