Inflation is a hot topic, with increased prices affecting nearly every industry and consumer. While inflation may be the broad explanation for rising costs, additional interconnected factors are currently affecting Colorado builders and contractors. Inflation’s ripple effect impacts the labor market, material costs, and supply chain timelines. Let’s take a deeper dive into the substantial effect inflation is having on construction in Colorado.
Companies across the country are experiencing the effects of “The Great Resignation,” but it’s especially prevalent in Colorado. The Denver Post recently stated that 3.5% of Colorado workers quit their jobs in March 2022, compared to 3% nationwide.1 With individuals continually seeking out new opportunities, companies must hire and train new workers on a much more frequent basis. In specialized industries like construction, training and onboarding can be very time-consuming, leading to additional labor costs.
Compounding the problem is the fact that employers aren’t just feeling the pressure of increased job vacancies; they’re also grappling with a demand for higher wages. The average hourly wage in Colorado rose 10% from the previous year, the largest increase in Bureau of Labor Statistics figures going back to 2008. While higher wages benefit workers, the unexpectedly sharp rise presents challenges for businesses as they try to retain current employees, hire new team members, and balance those expenses with rising building costs.
Associated Builders and Contractors recently reported that construction input prices have risen 21.4% since last year and nonresidential construction input prices are 21.9% higher. With various economic and geopolitical factors driving the effects of inflation, contractors and builders are facing a market showing few signs of relief.
The skyrocketing cost of construction is forcing companies to constantly navigate a volatile cost environment while managing their project bids and overall business. Adding another layer of complexity is the fact that some suppliers are adjusting their policies to quote prices only at the time of shipment, making it difficult for contractors to estimate project costs accurately.
Managing materials and timelines is a complex process for contractors without having to maneuver through constant delays and disruptions. In a recent survey by The Associated General Contractors of America, 72% of respondents reported that project timelines took longer than expected last year. In addition, nearly half of respondents stated that their firms are building longer completion times into contracts to account for delays related to supply chain issues.
Despite the difficulties, there is a bright spot: demand for commercial and residential construction is strong.
Nearly 60% of Colorado respondents to the 2022 Construction Outlook survey by the Associated General Contractors of America said their business volume matches or exceeds the previous year. While many of today’s roadblocks are out of contractors’ hands, there are proactive steps you can take to help manage this ever-changing market.
If you have questions about overall risk management or want to discuss the impacts of today’s market on your business, get in touch with your CCIG team at email@example.com.
1 The Denver Post. 13 June 2022. “Colorado businesses have a hiring problem. Leaders are turning to older workers, immigrants as solutions.” https://www.denverpost.com/2022/06/13/colorado-businesses-hiring-immigration-great-resignation/
2 Bloomberg. 2 June 2022. “Wage Growth Diverges by State: Georgia at a Record and D.C. Is Flat.”
3 Associated Builders and Contractors. 14 June 2022. “Construction Input Prices Are Up 21% From a Year Ago, Says ABC.” https://www.abc.org/News-Media/News-Releases/entryid/19475/construction-input-prices-are-up-21-from-a-year-ago-says-abc
4 Associated General Contractors of America. February 2022. Construction Inflation Alert. https://www.agc.org/sites/default/files/users/user21902/Construction%20Inflation%20Alert%20Cover%20-%20Feb%202022_000.pdf
5 Associated General Contractors of America. 2022 Construction Outlook Survey – Colorado Results. https://www.agc.org/sites/default/files/users/user21902/2022_Outlook_Colorado.pdf