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A strong nonresidential construction sector is offsetting weakened home construction and emerging as an anchor in an uncertain economy, according to The Wall Street Journal (subscription).

What’s going on: Inflation and higher borrowing costs aren’t putting a damper on nonresidential construction projects, on which spending totaled $982 billion in February, almost 17% higher than a year earlier.

• However, there is a growing backlog of these projects owing to shortages of materials—particularly electrical equipment that contains semiconductor chips—and workers.

Why it’s happening: “Construction activity in the U.S. is getting a boost from new plants for electric vehicles, warehouses for e-commerce and manufacturers deciding to do more work in the U.S. after global supply chains broke down during the pandemic. Construction spending on manufacturing last year was the highest on record, according to the Census Bureau. Increased federal spending on public-works projects, defense and production of electric-vehicle batteries and semiconductor chips is expected to keep construction activity elevated into next year, contractors said.”

• Construction-equipment manufacturers are expecting higher machinery sales in the U.S. this year.

What it means: Despite the availability of projects, some analysts warn that the lack of workers may soon make contractors reluctant to take on new jobs.

• “‘There’s not enough talent in the market to do all the jobs that are out there,’” one construction firm told the Journal. “‘We say ‘no’ to projects more than we say ‘yes’ these days. It’s part of managing our risk.’”
• As older, higher-skilled workers retire or find other jobs, many contractors have struggled to replace them or find younger employees with similar skills.
• But even finding new workers presents a challenge, since industry neophytes “are typically less productive than the older, higher-skilled workers they are succeeding” and contribute to longer construction times and project backlogs.