Even for those states where construction has been deemed essential, it has been difficult to keep employees on job sites, as they fear for their safety.
Slow and uncertain—that is the state of the construction ecosystem right now. The unstable environment for builders has resulted in huge layoffs for their workforce, a disproportionate amount of loans taken under a new SBA lending relief program and a downturn in demand.
Many states have shut down all but essential services over the past three weeks as the coronavirus pandemic continues to spread across much of the United States. Sometimes ambiguous definitions of which businesses qualify as essential services have left many architecture, engineering and construction firms looking for answers from state and local governments on whether their businesses can proceed.
Of the states that have ordered stay-at-home orders to residents, only five have issued halts to all construction, except those construction services determined to be emergency services: New York, Vermont, Pennsylvania, Michigan and Washington. To make matters more confusing, in the remaining 45 states that have not completely halted non-essential construction, certain municipalities including San Francisco and Boston have taken matters into their own hands and ordered a halt to all non-emergency construction projects (click for access to a map from the publication Builder tracking construction closures across the country).
Even for those states where construction has been deemed essential, it has been difficult to keep employees on job sites, as they fear for their safety.
In New England, the North Atlantic States Regional Council of Carpenters and the Painters and Allied Trade Union issued a work stoppage, saying construction sites are not following the guidelines to limit exposure to the coronavirus. Many union leaders have been calling for lawmakers to shut down all non-emergency job sites to help stop the spread and ensure employees’ safety.
The slowdowns in construction services have yielded a sharp decrease in employment within the ecosystem, with employment down 29,000 jobs from February to March, helping to feed unemployment claims that reached nearly 17 million through mid-March, a trend on a par with the Great Depression.
This downward jobs trend in construction is likely to continue through much of April, May and June, as more states feel the impact of the economic downturn and more guidance is put in place around essential and non-essential business services.
Construction Employment
Source: Bloomberg, Bureau of Labor Statistics
Meanwhile, in another signal that solvency of construction firms is being strained, data from the Small Business Administration shows that construction firms were the biggest users of loans under the new Paycheck Protection Program, which was unveiled less than two weeks ago to provide relief to small and midsize business pressured by the pandemic. The construction industry borrowed $34 billion of the $247.5 billion used through April 13.
On a demand front, both residential and non-residential construction saw declines in February. All non-residential sectors fell with the exceptions of dining construction, federal safety and transportation construction, each of which posted modest gains for the month. The Architecture Billings Index showed modest growth over the same period. We anticipate the impact of the coronavirus shutdowns to show up further in the ecosystem once March data is released in the coming weeks.
For information on how businesses can respond to the Covid-19 pandemic, please visit the RSM Coronavirus Resource Center.
