4 Ways COVID-19 May Impact US Construction Industry in 2021

Written by: Naima Amraan

Digital Marketing Intern

Having observed the impact that the Covid-19 pandemic has had on the wire and construction industry in the United States in 2020, there is a high likelihood that this impact will be felt in 2021.

Here are 4 areas where we may see a significant impact.

1).  Construction Spending

According to a report by Construction Pros, revenue shortfalls experienced by many states and local governments could undermine construction activity in the ensuing years. A New York Times report predicts China’s economy, the second-largest in the world, to grow by only 2% this year. The slow economic growth and the decline in the U.S stock market have resulted in heightened anxiety among investors which could negatively impact investment in construction and reduce construction spending. This not only affects firms directly involved in construction projects but also wire and cable manufacturers and distributors that provide materials for such projects.  

2).  Raw Materials  

According to the Buy American Act of 1933, manufactured goods in the United States are required to have more than 51% of their content produced in the U.S. However, construction industries in the U.S still rely on materials supplied by foreign countries. The ongoing pandemic poses a sourcing challenge that may lead manufacturers and construction firms to look for alternative sources of raw materials. Local companies may be forced to look in the direction of sourcing locally- reshoring back in the U.S or paying higher prices for supplies from less risky suppliers.

3).  Construction Projects  

By comparing the current economic recession to the great recession of 2007-2009, Construction Analytics reported that new construction projects could likely come to a standstill. Construction spending during the great recession declined 30% from $1.160 trillion in 2006 to $788 billion in 2011. Several firms in the construction industry were impacted by construction projects that were either delayed or canceled.  For example, Boston’s construction industry, which accounted for $20 billion per year in previous years, cut down on non-essential construction projects. The same cut applied to New York and California would collectively account for $280 billion per year. So far, 67% of construction firms have reported cancellations or delays since the outbreak of the pandemic. These canceled projects and delays could potentially stagnate into 2021 as the economy struggles to pick up.  

4).  Employment  

Approximately 40% of companies in the construction industry have reported terminating workers from job sites. Currently, construction accounts for 10.1% of the total unemployment. This unemployment data not only provides insight into the declining state of the economy but also correlates to slower and longer completion times for construction projects that could negatively impact the industry in 2021.

Conclusion:   

While this data gives a grim outlook on the impact that Covid-19 could have on the construction industry in 2021, construction and manufacturing remain essential services supporting various income-generating industries and have the potential to remain steadfast. There is potential for growth in the industry as many projects are currently funded and underway. There’s also the possibility of a national infrastructure bill being passed by Congress to stimulate job growth across the country.  

 There are clearly many unknowns such as when there will be a vaccine, how different states will manage outbreaks, and regional variations in unemployment levels. In the Covid-19 economy, construction businesses and manufacturing supply chains serving the construction industry will need to closely follow economic trends and respond to them appropriately.

Click here to read more about how the pandemic is impacting the construction industry across the country.