Capital
Gravity Yanks LBM Back To Earth, Labor Retakes Spot As No. 1 Risk
As lumber and other commodities begin to obey market laws of gravity, the underlying issue -- people -- clarifies as the root issue to focus on for the present and future.
Focus on commodities and producer price gyration of the past several months has been all-consuming.
As bottlenecked supply chains, accompanied by a domino-effect of materials and products producers seizing the moment to elevate unit cost baselines on everything that moves, continue through 2021 into early next year, eyes fixate on those variables, their impact on input costs, and their ultimate risk to builders' margins, now, next week, three months from now, and every future time frame.
The matter that should get more intense focus, however, is the biggest gorilla in the room issue, the biggest risk to business outcomes, the biggest issue related to affordability, the biggest matter impacting the residential real estate and construction firmament.
People.
The people challenge challenged builders and their distribution, manufacturing, and other field-oriented business partners well before the pandemic. As the pandemic did with other forces and factors – to the good and to the negative – it fast-forwarded residential construction's inflection moment regarding people with skills coming to their workplaces and producing the value that we know has homes and communities.
A well-placed housing economist who's hearing daily commentary from builders across markets notes:
"Lumber moving in the right direction. Hearing more about labor."
People, as workers and value producers, momentarily anyway, have leverage like they haven't had for decades.
- Quits are up as a sign of this leverage.
- Workplaces of all kinds compete with one another for workers, irrespective of industry sector.
This Wall Street Journal analysis by Austen Hufford and Nora Naughton paints a picture, partially of the future of work, but mostly of a nearer-future of workers.
Since the start of 2020, jobs in many industries including restaurants and retail have posted their highest-ever hourly wages relative to wages in manufacturing, according to an analysis of federal data by The Wall Street Journal. The $23.41 that hourly factory workers made on average in April is 27% more than average pay for retail workers, according to the Labor Department, down from a 40% premium for factory workers 10 years ago. Factory work pays 56% more than restaurant and fast-food jobs, the data shows, down from 83% a decade ago.
“Workers in some of these low-wage industries are demanding and getting better pay,” said Lawrence Mishel, an economist at the Economic Policy Institute, a left-leaning think tank.
Building is by no means alone in its business-risk exposure at the threshold of the 2020s. However, as an economic driver of so many related industry sectors, the nation's economy relies to disproportionate degree on residential construction's ability to reignite capability, both by rekindling the field's appeal to young career-seekers, and by advancing processes and industrial production facilities that can lower barriers to entry for a new, inexperienced-but-valued entrant into the construction trades.
At The Builder's Daily, we're working now with partners at The Building Talent Foundation to develop programming and assemble an action-based group of leader-stakeholders for our first Capability & Culture Summit this Fall.
We'll update you soon on those plans. Meanwhile the issue is one of focus on what matters versus "transitory" distractions. The noise is all about price fluctuations and inflationary forces. The signal is really the challenge, and that comes down to one notion.
People.
