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Construction firms bounce back, remain wary of long-term effects from pandemic

BY Sunday, July 05, 2020 02:16pm

Michigan had the largest percentage increase in construction jobs among dozens of states from April to May, as firms rebounding from COVID-19 are showing cautious optimism in hopes of the overall economy following suit.

As workers returned to the job sites after being forced to close as part of coronavirus mitigation measures, Michigan added some 50,500 jobs in the construction industry in May, according to data from the Associated General Contractors of America. That marked an increase of 51.4 percent from April to May, which ranked first among all states in terms of the percentage gain. 

However, despite the growth, the construction industry employs 29,800 fewer workers than it did in March of this year, around the beginning of the pandemic. 

Holland-based EV Construction is still working through a backlog of projects from when nonessential work was put on hold for six weeks across the state to stop the spread of COVID-19.

The firm remained 70 percent operational during the shutdown because of jobs that were considered essential in health care and manufacturing. EV Construction furloughed 20 of its 160 employees, but was able to call them all back once the industry reopened.

“Some of the furloughs were because of work slowdown, but some of it was lack of access to child care for employees with children,” said John Parker, EV’s vice president of project development. “Now that we’re back to work, last week we had over a 20 percent supplement to our own workforce.”

Parker added that new work was still coming in during the shutdown from March 24-May 7. In the short term, EV Construction is understaffed for labor and has hired 10 people, mostly skilled workers, he said. 

The Lansing-East Lansing metro area ranked second nationally in terms of percentage growth in construction employment from April to May at 80 percent, or 3,600 jobs, according to AGC. Battle Creek ranked sixth nationally with 67 percent growth in construction employment for adding 600 jobs, while Grand Rapids ranked seventh, having added 10,600 jobs, growth of 65 percent. 

Elsewhere, monthly percentage gains ranged from 22 percent in Muskegon, 28 percent in Niles/Benton Harbor and 35 percent in Kalamazoo/Portage. 

Long-term effects could be grim

Despite EV’s business ramping up since the reopening, Parker said his main concern is that the pandemic could have a lagging, long-term negative effect on the industry.

“We feel lucky that we don’t have a lot (of projects) in markets more directly affected, but generally our main concern is the projects that will likely now never make it to the drawing board,” Parker said. “For construction, we usually lag behind other industries in the effects of an economic slowdown.”

Architecture firms across the country reported a steep decline in billings for the third consecutive month, with the May Architectural Billings Index recording a reading of 32.0, according to the American Institute of Architects. The majority of firms saw their billings decrease. 

Any reading below 50 indicates a contraction. 

Still, EV Construction remains generally optimistic, Parker said. The firm is working to diversify its workload based on types of projects and geographic locations, and is pursuing some out-of-state work in Texas and Colorado.

However, the “economic boost” from lifting lockdowns will not sustain long-term growth for the construction industry, according to AGC of America.

“Boosting infrastructure spending, protecting firms that are operating safely and encouraging people to return to work will help convert short-term gains into longer-term growth,” AGC CEO Stephen Sandherr said in a statement.

Parker said it’s important for construction companies to maintain strong working capital to continue operating. EV was able to use a Paycheck Protection Program loan to help maintain its financial stability during the shutdown. 

“Without that assistance, I think that companies like ours and other construction companies might have burned their working capital,” Parker said. “That was a really important part of our story through the shutdown, but we feel strongly we can survive even if more assistance does not come, but we are very much at the mercy of other parts of our economy that we need to recover.”

The health of the overall economy is the main concern for Aaron Jonker, who serves as the president and co-owner of Wolverine Building Inc. in Grand Rapids. Jonker said that whether a project is canceled or delayed depends on the client.

“We work for a lot of national chains and some have put a pause on projects while others are moving forward even more aggressively because customers are not in the facilities currently, so they see it as time to get construction work done,” Jonker said.

‘Cautious optimism’

Overall, Jonker is pleased with the way the construction industry has responded to the pandemic, specifically related to safety protocols. 

“Our industry has been one that’s focused on safety for a very long time,” Jonker said. “We’re used to implementing safety changes, so I think we’re uniquely set up to adapt to it relatively quickly.”

Chris Beckering, executive vice president of Pioneer Construction, added that construction workers are accustomed to wearing personal protection equipment such as masks on the job.

“As of now, we are back to work, and we are working under new policies and procedures and following CDC guidelines,” Beckering said. 

Pioneer Construction in Grand Rapids was down to about 20 percent of its normal working capacity during the shutdown. It saw a slowdown in the supply chain with some materials, but has been working closely with suppliers and logistics companies to make sure it has materials ready, he said.

“We had quite a bit of time to deal with those things and prepare during the weeks we were shut down,” he said. “We’re all kind of waiting to see how things will shake out and what the long-term impacts are going to be. There are a lot of signs of cautious optimism.”

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