The construction industry, like many others, has been forced to adapt as a result of the crippling effects of COVID-19 on the global economy. Luckily, for construction companies with healthy backlogs of current and future projects, many firms have been able to maintain a positive trajectory. The national quarantine was a massive shock initially but, as rules and regulations were rolled out, construction firms and businesses were among some of those least affected by the pandemic. From a residential and commercial perspective, homeowners have never been more aware of the importance of home comfort and businesses are rearing and ready to open new doors to the public. In this brief article, we discuss the construction industry’s initial response to the pandemic, as well as the outlook for the remainder of the calendar year.
A Big Rebound
The first quarter of 2020 was a perfect storm for the construction industry. The combination of COVID-19 and a global oil war produced high costs and record lows for builds. Fortunately, after weathering the initial shock, the industry appears primed to make a full recovery in the back half of 2020. According to the Associated Builders and Contractors (ABC) backlog indicator, contractor confidence continues to surge following its April plummet. We may see a dip in the commercial sector depending on the overall health of the economy and how other industries continue to trend.
While the effects of COVID-19 have debilitated a number of industries, how hard has the construction industry really been hit? According to ABC, only 7.3% of construction firms have reduced staff with plans for additional cuts. Another 20.1% of firms have reduced their staff but have no plans to make further reductions, and a resounding 61.2% of firms have navigated the pandemic without making any reductions. Across the global landscape and, in comparison with other leading industries, these numbers are extremely promising.
What to Expect
While the current outlook is promising, the future of 2020 is extremely hard to predict. Depending on how COVID-19 is contained through the summer months, we can experience anything from significant recovery to an economic relapse. For construction companies, the most important thing to do right now is to balance your books, work to secure future builds, and keep your staff sharp and ready for the next big project.
In May, we saw 237,000 new jobs added to the non-residential construction industry with jobs continuing to fill in as the economy bounces back. If you are thinking of hiring new employees, the job market is currently saturated with motivated workers and highly skilled laborers anxious and motivated to get back to work with a new firm.
For any questions related to this article, or construction industry accounting and advisory services in general, contact Chad Luttrell today at cluttrell@vlcpa.com or 800.887.0437.
