Construction Backlog Indicator drops to 7.2 months

Contractor confidence has improved slightly since last spring

The number one issue facing U.S. construction contractors in 2021 isn’t Covid-19 and it doesn’t have to do with politics. It’s simple: finding work.

According to Michael Bellaman, president and CEO of Associated Builders and Contractors (ABC), the organization’s Construction Backlog Indicator currently stands at 7.2 months, down significantly from its reading of 8.9 in March of 2020.

“For some perspective, the highest backlog we have recorded was 9.9 months in the second quarter of 2018. The low was 5.8 months in the fourth quarter of 2009. What the currently dropping CBI means is that work is being delayed and/or postponed, while new jobs are not coming down the pipe.”

He added, “The most critical issue facing North American contractors is getting work. There is a lot of uncertainty there.”

Uncertainty notwithstanding, ABC’s November Construction Confidence Index, which was reported in December, showed 53.8% of survey respondents indicated they believe staffing levels will increase over the next six months. Those who believe sales will increase over the next six months went from a low of roughly 37% [in March] up to about 50% currently, while a total of 43.4% of those who took the survey have confidence that profits will increase over the next six months.

In contrast, the February survey, conducted pre-Covid, reflected 70% confidence that sales and staffing levels would increase over the next six months, while confidence in increasing profits was at 62%. 

“The following survey, conducted in March, showed confidence plummeting to below 40% on all counts,” Bellaman noted. “Basically, more than 60% of respondents believed sales, profits and staffing would decrease over the next six months.”

“The [latest] numbers show respondents are not highly confident, but the findings are encouraging,” he said.

At the start of 2020, ABC’s forecast estimated construction would need another 400,000 or 500,000 workers to meet demand, as forecasts had indicated the industry would see record construction spending of $1.3 trillion. “Obviously, when Covid hit, so did the fear of the unknown. No one knew what we were dealing with,” Bellaman said.

As a result, the industry lost 975,000 jobs in April alone. Combined with March numbers, Bellaman said a total of one million construction jobs vanished in two months due to Covid-19.

“Construction rebounded significantly in May with about a half a million jobs created, and we have added jobs since, but we are still down a couple hundred thousand jobs,” he said. “The introduction of vaccines gives us a light at the end of the tunnel, and there is a lot we now know about how to stay safe. We know the protocols and the right things to do. People are starting to feel better about things turning around, but in the near term, there are big questions facing contractors.”