Mixed Signals by Mark Levin

Mixed Signals

by Mark Levin, CAE, CSP

Executive Vice President, Chain Link Fence Manufacturers Institute

It seems as though everything we discuss in the fence industry these days comes with some type of qualifier.

“The industry should continue to grow in the next six to 12 months. Of course, if the COVID pandemic spikes, that could change.”

“The infrastructure bill will be a big boost to fence contractors who do public works projects. Obviously, supply chain backups might push the time frames for getting that work out a lot longer.”

“There is no question that the fence industry has some great opportunities in the next couple years. That assumes we can solve our skilled manpower shortages and staff the jobs at needed levels.”

With all the talk about the continuing boom in the fence industry (for the most part), what are the underlying realities of what’s happening on a day-to-day basis? A new study from the Associated General Contractors (AGC) puts some sobering numbers on where construction is headed and why there is legitimate concern for the near future.

Here are some of the statistics and conclusions from the AGC Report. Our thanks to Ken Simonson, AGC chief economist, for allowing us to use this information.

Construction employment in 39 of the

50 states has still not recovered to prepandemic (February 2020) levels. Wyoming, New York, Louisiana, and West Virginia lag furthest behind.

While 74% of contractors plan to hire in the next 12 months (good news), 90% say their biggest need is for hourly craft positions and 89% say those are the hardest jobs to fill (not so good). 72% said the reason they can’t fill the positions is that the candidates for those jobs don’t meet industry standards.

A big majority – 61% - say that worker shortages are the cause of delays on their projects.

The cost of construction materials is another huge problem. Steel mill product prices are up 111% since April, 2020. Lumber and plywood are up 52% over the same period.

Here is one statistic that should get your attention: during the first three quarters of 2021, the change in the cost of construction materials exceeded the change in bid prices by over 20%!

I wonder who is absorbing the difference? Any guesses?

Adding all these factors together, there are some very mixed signals about what the next year will hold. On the plus side: • Many markets are showing some good growth and are forecasted to continue growing, perhaps at a slower rate but still growing. These include remodeling, data centers, and (eventually) public works. • Residential construction spending is up over 25% since the same period last year. • Permits for multi-family construction that have not yet started are up substantially, creating opportunities for the near future. On the minus side: • A potential health and safety-related problem may exist as statistics show that while the COVID vaccination rate for non-construction occupations is at 81%, the vaccination rate in the construction industry is only 57%. • Commercial and industrial construction is still down, with lodging, office, and school construction lagging the furthest behind. • Specialized health care facilities will replace larger facilities, such as hospitals and nursing homes.

So, where does this leave the fence industry? I’d say cautiously optimistic. The caution comes from the fact that the industry continues to play catch-up in many ways (workforce development, supply chain problems, innovation, etc.). While there appears to be a heightened awareness of the long-term implications of these issues, the industry still needs to be more engaged in efforts to address these issues and begin getting ahead of them.

In the meantime, the optimistic side shows that there looks to be a continuing rebound from the pandemic marketplace in some of the larger markets for fencing such as energy, especially in the renewable fuels segment, and infrastructure, both traditional and in new technologies.

While dealing with the demands of the current marketplace, companies really need to be doing some intense forecasting and planning for the next two years. Opportunities will be coming for those who are best prepared to be flexible, wellstaffed, and willing to move into emerging markets.