OUTLOOK 2022: Dodge Construction Network Projects Moderate Growth for 2022, Despite Challenges

After another year in a pandemic, economists discuss COVID’s impact on the construction industry

Dodge Construction Network recently hosted its 83rd annual Construction Industry Outlook event for 2022. This event revealed exclusive industry insights regarding construction and what is in store for 2022. As the industry continues to rebound and bounce back from the COVID-19 pandemic, it remains clear that the pandemic has forever changed the construction landscape.

In his opening remarks, Dodge Construction Network’s Chief Executive Officer Dan McCarthy said, “We’ve come to realize it won’t be ‘construction after COVID,’ but ‘construction and the impact of COVID.’”

A Wide-Lens View of 2022

Dodge Construction Network’s Chief Economist  Richard Branch shared that the dollar value of construction starts will increase 6% in 2022. Branch emphasized that, while residential construction will continue to play a large role in next year’s growth, a more balanced recovery in the nonresidential sector will begin – particularly as funding from the recently passed infrastructure package begins to enter the market.  Alone, the  total non-building value forecast of 32.5% year-over-year growth from 2021 to 2026 would instead be 14.9% without the bill’s passing. 

The Challenges in Store for Construction

Branch theorized that there are three main challenges that will impact the construction sector over the next year: price, people, and productivity. These “triple p’s,” as Branch called them, will noticeably impact construction starts in 2022. 

“All those projects sitting in planning are taking longer to get through, and while construction starts will grow in 2022, that growth is expected to be modest,” Branch said. “…it’s very clear, as we put all of this together, that if not for the challenges, shortages and prices that we’re currently facing, construction activity would be much stronger than it currently is.”

The labor shortage continues to impact almost every industry, not just construction. Cris deRitis, Deputy Chief Economist at Moody’s Analytics, shared that there are currently 10.4 million job openings as of August 2021. He noted that there were nearly 7.7 million people who were unemployed — meaning they are not working or actively seeking work. However, according to deRitis’ projection, this may not be such a massive problem for much longer. 

“By the end of next year, we expect that the economy will have recovered all of the jobs we lost during the pandemic,” deRitis said. “As well as jobs that we should have been creating, just due to population growth as people graduated from high school and graduated from college. So, by the end of 2022, our baseline forecast calls us to be back at full employment, basically anyone who wants a job can get a job.” 

While deRitis’ projection would bode well for the construction industry, as well as the American economy as a whole,Branch, in particular, fears that high material costs may not see resolution in 2022. 

“From an operating perspective, plants are very slowly getting back to normal,” Branch stated. “But, we’re still dealing with trucking issues, we’re dealing with port issues, so I think the inflation we’re dealing with here in the construction sector, as it relates to materials and prices, is probably going to last into mid next year before we start to see prices pull back. But, even as those prices start to pull back or the inflation slows in the back half of 2022, that level of prices should remain fairly high, at least through the end of next year.” 

Productivity Hindered by Economic Factors

The combination of these two aforementioned problems spearheads into what Branch thinks might be the most important problem to tackle in 2022: productivity.

“In a world where prices are rising, materials are hard to come by, and labor is scarce, the ability to do more with less is what’s going to be a critical path forward, in terms of increasing your profit margins,” Branch stated. 

Improvements in productivity are not as simple as some may think. Productivity needs to improve at all levels within an organization, not just on-site technological advancements and adoptions.

“Productivity enhancements are not just always about on the job changes,” Branch said. “Many companies have made great strides, in terms of collecting and utilizing data within their own activities. So far though, comparatively few of those have been able to bridge, or make that full potential between their own internal data services and data provided by third parties or vendors or private data sources.” 

The statements made at OUTLOOK are data-driven projections from reliable resources which predict the construction sector’s rebound and recovery from the COVID-19 pandemic in 2022.