Commercial contractor optimism remains solid
Confidence in the commercial construction industry appears to be strong, despite concerns about jobsite efficiency and labor productivity.
According to the Q4 2017 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index, optimism remains high in the commercial construction industry with 57% percent of contractors expecting to hire in the next 6 months and a large majority reporting stable or increased revenue expectations in the next year. The Q4 composite score is 74, up one point from Q3.
However, nearly 90% of contractors do not consider jobsites to be very efficient while 45% of contractors identified labor productivity as the key to achieving jobsite efficiency, followed by jobsite logistics, and project management, according to the index released today. About 45% contractors reported the use of prefabricated building components to be the top means of improving labor productivity.
“Commercial contractors remain optimistic about the industry outlook, although labor productivity and costs are hindering jobsite efficiency,” said Jennifer Scanlon, president and CEO of USG Corporation. “There is an urgent need for innovations in building materials and workforce development programs.”
More than 50% of contractors expect to hire workers in the next six months, yet concerns about the cost of skilled labor and the adequacy of worker skills have remained steady throughout all four quarters of 2017. The report reviled that 42% of contractors predict finding skilled workers will worsen in the next 6 months, and 92 percent note they are at least moderately concerned about the skill level of the workforce, with heightened demand particularly in the plaster and drywall trades.
“The commercial construction industry is essential to the U.S. economy – when America is building or re-building, America is growing. It’s great news that the majority of these companies are ready to hire,” said Thomas Donohue, president and CEO of the U.S. Chamber. “As worker shortages persist across industries, sectors like commercial construction will have to find solutions through new innovations, technology, and training to continue growing and moving the broader U.S. economy forward.”
The Index looks at the results of three leading indicators to gauge confidence in the commercial construction industry – backlog levels, new business opportunities and revenue forecasts – generating a composite index on a scale of 0 to 100 that serves as an indicator of health for the contractor segment on a quarterly basis. The Q4 2017 composite score was 74, up one point
from Q3, representing a consistent sentiment of health in the sector.
On average, contractors currently hold 9.4 months of backlog, relatively close to the average ideal amount of 12.5 months, continuing the stability of the market, although there is still room for growth. Down two points from Q3, this represents 75% of their ideal backlog levels.
Nearly all, or 99%, of contractors report high or moderate confidence in the demand for commercial construction while 34% believe the market will continue to provide strong opportunities for the next 24 months.
About 47% of contractors expect to see an increase in revenue in the next year. The percentage has increased over the last two quarters from 41% in Q3 and 40% in Q2.
Regulatory Wrap-Up: Paid leave returns to the spotlight
Labor Department: The Trump Administration announced a notice of proposed rulemaking related to its tipped wage regulations. Under the proposed rule, employers could establish tip-sharing policies that include all employees. The current rule which does not allow for tip-pooling amongst front-of-the-house and back-of-the-house workers has been the subject of multiple legal challenges and the U.S. Supreme Court is currently reviewing one of those cases. When this rule moves forward, the pending cases will become moot. The public comment period closes Jan. 4. A final rule will likely not be issued for many months.
Massachusetts: Local municipalities certified the signatures gathered by Raise Up Massachusetts to place two initiatives, a minimum wage increase and a paid leave mandate, on the 2018 ballot. The signatures must now be validated by state election officials. The minimum wage initiative would raise the state rate to $15/hr by 2022. Activists will have additional time to gather signatures (should they need it) by June 19, 2018 if the legislature fails to act on the issue.
Las Cruces, N.M.: The city council voted unanimously to correct a drafting error in its 2014 minimum wage ordinance. The error called for a cost of living increase to go into effect in 2018, rather than 2019. For 2018, the city will now maintain its minimum wage at $9.20/hr and $3.68/hr for tipped workers.
Minneapolis, Minn.: A district court judge heard oral arguments in the case brought by the state chamber of commerce against the city’s $15/hr minimum wage ordinance enacted last year. The chamber is arguing that the city ordinance is in violation of the state minimum wage law, which is a similar argument that was utilized by the chamber in its failed case against the city’s paid leave ordinance.
U.S. House: The House Education and Workforce Committee held a hearing on the “Workflex in the 21st Century Act” which would offer employers with qualifying programs a safe harbor from the requirements of state and local paid leave mandates. It would apply to both full and part time workers. As expected, business proponents noted the confusing and cumbersome patchwork of state and local laws while opponents argued that the bill would allow businesses to evade current laws that cover millions of Americans. Next steps for the proposal are unclear, but several Republicans have voiced their support which could open a path to passage in the House. The U.S. Senate would remain a challenge absent vocal support from Democrats.
Massachusetts: Local municipalities certified the signatures gathered by Raise Up Massachusetts to place a paid leave mandate on the 2018 ballot. The signatures must now be validated by state election officials. The initiative seeks to provide a maximum of 16 weeks of paid leave at up to 90% of average weekly wages with a maximum of $1,000/wk. It would also create a trust fund into which employers would pay 0.63% of each employee’s annual wages. Activists will have additional time to gather signatures (should they need it) by June 19, 2018 if the legislature fails to act on the issue.
Chicago: Responding to calls for enhanced enforcement following the city’s 2014 passage of a minimum wage increase, the city’s Department of Business Affairs and Consumer Protection has simplified its complaint process and provided additional tools for investigators. For example, the department now allows investigators to issue subpoenas for all employee records, not just for the individual who filed the complaint. Also, advocates from Arise Chicago are drafting an ordinance to establish an Office of Labor Standards within the department to focus solely on enforcement of city employment laws.
New York City: Local efforts to increase wage enforcement in the construction industry are drawing headlines as district attorneys increase coordination across all five boroughs and nearby counties. Recent efforts resulted in indictments, uncovering $2.5 million in unpaid wages to workers. City officials have announced their intent to continue investigating and prosecuting wage theft issues. Their efforts will not be limited to the construction industry.
NLRB: New general counsel Peter Robb issued a memo outlining several issues he plans to address, including Obama-era joint employer decisions and standards. The memo clearly states that the board will operate under a different philosophy compared to its predecessor. Robb also rescinded many of the previous general counsel’s memorandums which direct the enforcement posture of regional offices.
U.S. Congress: Senate and House conferees are set to continue work this week on combining the two tax reform bills that passed each chamber, albeit with notable differences. The expectation is that conferees will produce a product for an up or down floor vote in each chamber at some point during the week of Dec. 18. Should those votes succeed, the package will advance to the President’s desk for signature.
South Dakota: Opponents of South Dakota’s landmark online sales tax case seeking to overturn the 1992 “physical nexus” precedent for sales tax collection obligations filed several amici briefs asking the Supreme Court to deny cert in the case. Several associations representing online and catalogue sellers, a handful of Members of Congress who have long opposed congressional solutions, and taxpayer groups all filed in opposition of the case moving to the Supreme Court. The groups generally argue that compliance is too complex for businesses and the issue should be solved by federal legislation, however all the groups represented are opposed to the legislation currently stalled in the House Judiciary Committee. The court will determine what cases may be heard during the 2018 term in the coming months.
- NLRB General Counsel Peter Robb’s memo this week to field directors outlining the types of cases that necessitate “alternative analysis” is a clear indicator that the NLRB will likely be reversing many of the Obama-era decisions and returning balance to the Board. This is the first concrete evidence that the new Board is seated, the staff is in place, and the real work of the Board that the employer community has long awaited is finally beginning.
- Instances of sexual harassment and assault continue to dominate the headlines. Expect those conversations and the resulting political energy to manifest in policy proposals at all levels of government. This week in Chicago, the local hotel union affiliate of UNITE HERE passed an ordinance requiring hotels to provide housekeepers with panic buttons. This is just one example of policies that will emerge in the coming months. Employers would be wise to help lead these conversations and voluntarily adopted and institute policies that protect workers and make sense within the context of their business.
Legislature Status for Week of 12/11/17
- The United States Senate is in session this week
- The United States House is in session this week
- The following state legislatures are in session year round: Illinois, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and Wisconsin.
- Massachusetts, Michigan, New Jersey, Ohio and Pennsylvania are all meeting actively this week.
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