Shortages of labor, materials may harm infrastructure plan
The biggest threat to President Joe Biden’s vision of energizing the U.S. economy with the largest infrastructure program in decades may not be its challenging path through Congress but a dire shortage of everything from workers to cement mills.
While weeks or months of negotiations will be needed to enact legislation, Republicans and Democrats are united in their support for hundreds of billions of dollars in new spending on infrastructure in coming years. Yet the companies that will be relied on to pave the roads, build the bridges, lay the water pipes and assemble the trains aren’t yet planning to meet those needs, economists and industry insiders say.
And that’s even as they face immediate shortages — from steel and cement to the supply of labor — stemming from the unprecedented difficulties of a sudden reopening of the economy after last year’s shutdowns.
“There’s already a labor shortage in construction, so you can’t throw a trilliondollar nuclear bomb of money into the industry,” said Bassem Hamdy, CEO of Briq, a company that runs cost estimates for construction businesses.
Construction companies are excited for more business but aren’t taking steps to boost hiring in anticipation of the package passing, Hamdy said. U.S. steelmakers aren’t boosting supply enough to meet expected demand. And tariffs on items including aluminum and lumber are hampering affordability.
Friday’s jobs report suggested continuing difficulties among some employers to ramp up hiring as the economy reopens, with payrolls rising less than forecast and wages jumping as companies try to lure workers.
The scarcities have caught the attention of the White House. Biden said Friday that steps “to combat these supply constraints” would be taken in the coming weeks.
Consider steel, the price of which has skyrocketed about 225 percent to $1,665 a ton in the year through last Monday. Biden’s legislation would increase demand for the material by 5 percent each year in the first five years of an infrastructure plan, or about 5 million tons per year, according to CRU Group, a commodities research firm.
Planned capacity coming online by the end of 2022 is only about 4.6 million tons a year, according to Bloomberg Intelligence analyst Andrew Cosgrove. That would squeeze prices and supply even more.
Already, U.S. producers are so overbooked on orders that American consumers are forced to rely on foreign steel despite the holdover tariffs from the Trump administration.
Tom Conway, president of United Steelworkers, the largest industrial union in North America, said he’s concerned that the supply crunch means the infrastructure push will have to source materials abroad, benefiting other countries with employment gains, instead of the U.S.
“Here’s what I think the administration has to be concerned about,” Conway said. “They’re going to press and press and press trying to get an infrastructure bill, and all these manufacturers will say, ‘We’re not ready. We need more runway to get ready. So in the meantime, get it offshore and do the projects and we’ll get started on ours.’”
The housing industry, which has boomed thanks to low mortgage rates, is worried about competition from infrastructure projects.
Domestic U.S. sawmills haven’t haven’t kept up with construction, and the housing industry imports about 30 percent of its lumber from Canada. Lumber prices are up roughly 400 percent since the start of the 2020 recession.
The infrastructure bill “will place a huge demand for steel and concrete that will impede our ability to build out multifamily and other types of housing,” said Jerry Howard, CEO of the National Association of Home Builders. “You’ve got to increase output. And where that’s going to come from? Lord only knows. It’ll be difficult to enact because of the lack of supplies, labor, everything.”