United States | H2 2022

Research

Construction Outlook
Rising costs and tempered outlooks
Executive
summary
Construction industry health and activity
Inflation, supply chain disruptions, yet another variant of
COVID-19, and a protracted land war in Europe were met with a
real year-over-year increase in the value of construction
through the first half of 2022. While residential construction fell
from its historical peak in 2021, it continues to expand and
nonresidential construction has returned to nominal growth.
Despite an emerging pullback, the future should hold
persistent growth as, in coming years, nonbuilding
construction is expected to increase significantly. Though
global economic concerns loom, the construction industry will
see activity remain healthy, albeit with shifting focus and
continued challenges.

Labor employment and wages

Labor availability remains a deep-set structural challenge for
the industry and will be a larger issue as construction demand
persists and shifts focus. Estimates of future need based on
these upcoming expenditures show the gap will only widen,
with a particular need for nonbuilding and public workers.

Materials costs and availability

Continued volatility in materials availability is likely to generate
similar growth rates as in 2021, although due to a different set
of contributing components. Steel and lumber, which saw the
most aggressive price increases in 2021, are stabilizing. Fuels,
plastics, and even services related to construction are
responsible for price increases in the first half of 2022 and are
unlikely to stabilize over the second half of the year.

Andrew Volz
Construction
Research Lead

Contents
Executive summary 2
State of the industry 3
Mid-year analysis 4
• Total construction costs 5
• Construction materials costs 7
• Construction labor costs 12
Revising our previous forecasts 15
2 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
 State of the
industry
Increasing construction starts and a strong pipeline marked the first half of
2022 as developers fought supply chain issues and other disruptions to get
projects started before further interest rate increases. Labor shortages
continued with little change and material prices rose. A modest pullback
has been brewing in the data since the start of April but major markers of
activity remain in growth or strong territory. With talk of a recession,
shrinking margins, and reduced confidence, activity will likely see a further
pullback, however, with significant capital investment flowing through
existing projects and the IIJA, the market is likely to see continued growth
through these challenges and beyond.

Construction stats
Construction employment
June 2022 6-month Since pre-
1-year change
value change pandemic

Unemployment 3.7% -3.4% -3.8% -1.8%

Total employment 7.67 M +122,000 +296,000 +50,000

Construction costs
Since pre-
6-month change 1-year change
pandemic

Wages +2.4% +5.6% +10.5%

Materials +9.8% +16.8% +42.5%

Total costs +5.9% +10.1% +23.9%

Construction spending and starts

Mid-year 2022 SAAR 6-month Versus same
(Millions of 2018 dollars) change period prior year

Residential $650,000 -1.9% 1.8%

Nonresidential
$612,000 -6.3% -11.8%
building

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

3 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Total construction cost update

Mid-year analysis

Strong nominal growth tempered by inflation and entering a modest pullback

Year-over-year change in nominal construction spending
35.0%
25.0%
15.0%
5.0%
-5.0%
-15.0%
9

2
9

2
9

1
19

20

21
19

20

21

22
l-1

l-2

l-2
v-1

v-2

v-2
r-1

r-2

r-2

r-2
y-1

y-2

y-2

y-2
p-

p-

p-
n-

n-

n-

n-
Ju

Ju

Ju
Ma

Ma

Ma

Ma
No

No

No
Ma

Ma

Ma

Ma
Se

Se

Se
Ja

Ja

Ja

Ja
Total construction Total residenti al Total nonresidential

Spending: % change YTD MoM SAAR

Trajectory Sector
High residential spending has led v. same period prior year % change
increases in construction activity Water supply 4.4% 7.41%
throughout the pandemic, carrying the Conservation and development 12.2% 1.74%
market through an extended period of Continued
Sewage and waste disposal 7.9% 0.55%
nonresidential spending contraction. expansion
Nonresidential spending picked up in Amusement and recreation 1.3% 0.69%
early 2021 with the easing of COVID-19 Educational 15.2% 0.11%
restrictions and returned to modest Commercial 14.2% -0.60%
growth on a nominal basis at the start of
2022. Spending in the sector has
Healthcare 3.5% -0.90%
Emerging
remained in growth territory through the pullback
Residential 21.1% -1.65%
first half of the year, buoyed by Power 28.6% -0.23%
exceptional year-to-date growth in the Manufacturing 22.4% -0.12%
power, manufacturing, educational, and
commercial sectors. From January to May Communication -2.4% 0.96%
2022, the seasonally adjusted annual rate Stabilizing Public safety -21.0% 0.00%
of total construction spending expanded Office -3.9% 0.49%
at a monthly rate of 0.63%, above the Transportation -5.4% -1.01%
growth rate observed in 2021.
Continued Power -8.8% -1.80%
contraction Highway and street -0.1% -2.73%
Sources: Bureau of Labor Statistics Producer Price Index,
Local Research Lodging -17.3% -0.16%

4 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Mid-year analysis

1. Total construction
cost update

However, total construction spending fell roughly
1.1% on a seasonally adjusted, annualized basis in
June and the trajectories of individual sectors have
shifted rapidly in a mixed pattern. Notably, public
sectors for infrastructure saw continued growth and
several private sectors stabilized above historic rates,
albeit with moderately shrinking backlogs.
Residential and other sectors began to pullback
modestly from peaks earlier in the year.
Though nominal increases are a positive change for
the industry, spending figures alone do not quantify
the volume of construction put in place.
Given that inflation over the last year is responsible
for much of the increased spending, total volume put
in place is below historical rates in sectors of modest
growth and contractions are more severe elsewhere.
Nonresidential construction is anticipated to end the
year even — with spending last year on an inflation-
adjusted basis — while residential spending is in
growth territory already. The nonresidential sector is
expected to see year-over-year growth return to
historical levels in 2024, as disruptions are likely to
persist in to 2023. IIJA funding distribution will be
limited in the next year.

Development trajectories differ regionally as well

Following leading industry indicators, the AIA’s Architectural Billing Index and the AGC’s Construction Backlog
Indicator, the pullback is visible as a deceleration in the national average, while individual regions are seeing
different paths forward. The Northeast is faring the worst with numerous months of contraction in the first half
of 2022, while the West has picked up the pace of billing and backlog increases in recent months. The South
and Midwest have maintained billings growth that is beginning to decelerate but will nevertheless create an
appreciable pipeline of construction activity in the regions.

ABI CBI
65 11.0
60 10.0
55 9.0
8.0
50
7.0
45 6.0
40 5.0
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22

West South Midwest National Midwest Northeast

Northeast National South West

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

5 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Margin squeeze still in play
Costs will push up as quickly as the market can bear
12%
10%
8%
6%
4%
2%
0%
Jan-22 Feb-22
Residential final costs
Residential input costs
Residential construction has seen the input-bid
spread shrink since March of 2022, largely due to the
falling costs of lumber and plywood, which
contribute disproportionately to the sector’s
material costs. For nonresidential construction,
inputs have returned to outpacing bids after
catching up slightly in April. As of June, inputs for
nonresidential costs were up 10% from the start of
the year while final costs were up 5.9%. Though this
is a notably smaller spread than the same period of
the prior year, when input costs rose 14% and final
costs rose just 3%, continuous elevation of inputs
puts further stress on margins until the costs can be
passed through.
Sources: Bureau of Labor Statistics Producer Price Index, Local Research
6 | Construction Outlook | United States | H2 2022
Mar-22 Apr-22 May-22 Jun-22
Non-residential final costs
Non-residential input costs
Though the input-bid spread will eventually be
covered, recessionary fears are likely to slow the rate
at which costs are passed on. While we have not seen
significant cancelations to this point in the pandemic,
it remains a moderate concern should the economy
decline significantly. However, the long duration of
many projects — especially larger infrastructure and
similar funded by the IIJA — are likely to provide
sufficient opportunities for the market to maintain
heightened activity levels even with more narrow
margins.
Total price increases are likely to continue due to the
relatively strong pipeline and demand for construction,
as well as continued materials and labor issues. Should
projects begin to defer or cancel en masse, the input-
bid spread coverage may move into 2024 and beyond,
persisting well beyond the anticipated time frame for
material and labor stabilization.
© 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
2.
Mid-year analysis

Construction
materials update

A whack-a-mole game of price and volatility increases

The table below analyzes the recent cost history of nine major types of construction materials in recent years
and in the first half of 2022. The materials are ranked by historical cost volatility over the past 30 years, with the
least volatile materials at the top, and the most volatile at the bottom. Although forecasts for any month or
year may swing, measuring differences in volatility is key to developing an accurate forecast and a project
budget that correctly accounts for potential cost risk.

Price index YoY Price index YTD Lead times

Material Change in volatility
% change % change (from prior month)

9.0 4.6 1.0 8.2% 1.40% Increased

Flat glass
69.2
Low volatility

Lumber and plywood 20.3 35.6 -26.9% -16.0% Stabilizing

22.4 29.2 15.7

Aluminum mill shapes 20.3% 7.1% Increased
27.7 13.7 3.2
Insulation materials 16.0% 3.6% Increased

38.3 33.8
Plastic construction products 9.8 27.0% 7.8% Increased
Moderate volatility

105.0
42.4
Steel mill products 25.2 22.4% -4.8% Stabilizing
47.3
Concrete products 8.6 7.7 13.5% 6.7% Increased

63.8 31.8
Gypsum products 16.2 18.9% 7.8% Increased
High volatility

111.5
97.5
83.4
#2 diesel fuel 111.1% 83.6% —
118.8 93.6
Copper and brass mill shapes 14.4 0.00% 0.00% Increased

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

7 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Price volatility remains a major challenge for
construction materials.
Since the start of the pandemic, a variety of
material divisions have seen astonishing price
growth and volatility. Lumber and steel, once the
worst offenders, have stabilized due to a
combination of supply chain management and
onshoring. These and other construction materials
with significant declines in volatility generally have
seen corresponding decreases or stabilization of
prices in the first half of 2022.
However, volatility has not gone down uniformly
across construction materials. Some items are
charting rapid price and volatility escalations as new
geopolitical and other factors disrupt previously
secure supply chains. The whack-a-mole pattern of
growth has created conditions for continuous overall
escalation and a combination of persistent demand
and stubborn inflation has largely stopped prices
from decreasing.

Decreasing 50%
30%
Lumber 10%
Wood -10%
Plywood -30%
Paper COVID-19
COVID-19 Initial Acceleration
Initial Acceleration 2022 YTD
2022
Impact
impact Recovery
recovery YTD

Stabilizing 50%

30%
Steel
10%
Non-ferrous metals
Transportation -10%
COVID-19
COVID-19 Initial Acceleration
Initial Acceleration 2022
2022 YTD
impact Recovery
Impact recovery YTD

Increasing
50%
Services
Concrete
Plastics 30%
Thermal protection
Glass
10%
Finishes
Furnishings
Energy -10%
Equipment COVID-19
COVID-19 Initial Acceleration
Initial Acceleration 2022
2022 YTD
Overall impact
Impact recovery
Recovery YTD

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

8 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Material classification by the current and historical trajectory
of prices and volatility is illuminating, with three general
categories emerging, those experiencing accelerating growth,
those stabilizing, and those that have stabilized to the extent
possible with ongoing uncertainties.

The stabilized category is the smallest, Construction sand:

comprising lumber and other wood products
almost exclusively. These are likely to see a
continued downward trajectory if residential
pullback continues in earnest due to increased
mortgage rates and other complications.
The stabilizing category is a bit broader and
includes materials which are vulnerable to price
spikes despite the current trajectory. Though
steel is down 4.8% from the start of the year after
outsized gains in 2021, looming demand from the
IIJA and limitations on sourcing therein will put
additional pressure on the resource. Materials in
this category may shift in the coming months as
demand ebbs and flows as well as in response to
potential changes in manufacturing and other
supply chain redresses.
In addition to gains from overall energy costs,
cement, glass, and semiconductors are seeing
considerable disruptions to a shared core
nonmetallic mineral: sand. While requiring
different grades and compositions, the sand
industry is seeing rapid price growth as well as
shortages in high quality materials that are
likely to have long term consequences. While
alternative materials may present themselves
over time, the immediate effect is upwards
pressure on prices that is not likely to subside
in the near-term. Additional materials seeing
this pattern of increase include plastics,
furnishings, finishes, equipment, and services.

The accelerating growth category of materials

comprises those which have exceeded or are on
pace to exceed the full-year 2021 price increases The changing roster of high volatility
in the first half of 2022. These includes energy
products, which have been severely impacted by components has led to some of the
the Russian invasion of Ukraine, as well as several largest gains overall of input prices
other less conspicuous items. Notably, cement,
glass manufacture and semiconductors for in the historical record, up 9.8% on
equipment and machinery are among some of
the larger price increases and are the most average in the first half of 2022 and
concerning emerging shortages in materials.
While historically some of the lower volatility
is cause for concern moving
materials, both concrete and glass are highly forward. Though below record
concentrated industries and are
disproportionately reliant on a few local increases in 2021, the current
producers with extremely high energy usage for
production. Additional materials seeing this
trajectory is not far behind.
pattern of increase include plastics, furnishings,
finishes, equipment, and services.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

9 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Domestic production has seen mixed recovery
Supply side remains the main source of disruptions

Domestic productivity for construction materials Domestic production of construction steel,

and related items has oscillated since the a high demand product which saw considerable
outbreak of COVID-19, with industries struggling price increases, is now roughly 30% higher than
with the virus, supply chain disruptions, and its pre-pandemic levels. This has helped to
heightened demand. Recovery of industries moderate current price levels in recent months
above and beyond pre-pandemic levels has and supply chain issues have corrected.
been mixed, with several segments seeing rapid
growth and others only reaching net growth in
recent months.

Domestic production of construction materials

170
160
Production index (2017=100)

150
140
130
120
110
100
90
80
70
Feb-20

Feb-21

Feb-22
May-20

May-21

May-22
Mar-20

Jun-20

Mar-21

Jun-21

Mar-22

Jun-22
Oct-20

Oct-21
Aug-20
Sep-20

Dec-20

Aug-21
Sep-21

Dec-21
Jul-20

Jul-21
Nov-20

Nov-21
Jan-21

Jan-22
Apr-20

Apr-21

Cement Concrete product Glass and glass product Apr-22

Lime and gypsum product Construction steel Arch and structural metal
Sawmills Veneer/plywood/engineered wood

However, increased production does not Domestic glass production remains down from
necessarily correspond to more stable prices. pre-pandemic levels as well, and commensurate
Domestic cement and concrete product cost increases have been noted for the first half of
manufacture is up roughly 10% from pre- 2022. Like concrete, the primary drivers for costs
pandemic levels but prices have not regulated in the industry are compounding and
similarly to steel. Due to underlying supply chain unavoidable. While the industry is expected to
constraints, the recent return of the industry’s grow steadily, price relief is unlikely.
pre-pandemic production levels and impending
demand from the IIJA, prices have continued to
increase in recent months and are unlikely to
stabilize in the near term.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

10 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Geopolitics remains the
largest source of disruptions
In its sixth month, the Russian invasion of Ukraine
continues to be a major source of uncertainty and
trailing economic impacts are beginning to manifest.
While the petroleum shock was immediate, impacts
on semiconductor production and other items are
beginning to accumulate. The conflict is generally
slowing growth in the construction market and
beyond. Russia and Ukraine are major exports for a
variety of critical industrial materials, as well as grains
and other items with wide reaching indirect effects.

RU/UA construction materials trade

% US % Global
Material
imports exports

Platinum-group metals 35% 8%

Pig iron 31% 16%
Uranium 24% —
Petroleum oil 17% 7%
Iron or steel ingots 17% 31%
Fertilizers, chemical 12% 16%
Synthetic rubber 8% 9%
Nickel ores and concentrates 8% 11%
Miscellaneous nonferrous 7% —
base metals
Aluminum 6% 14%
Nickel 6% 11%
Coal 6% 14%
Source: World Bank Group, US Federal Reserve

Additionally, resolution of the conflict will result in a

massive demand spike for construction materials.
Damage to the Ukrainian built environment alone is
estimated at $750 billion and rising. Mobilization of
enough materials, equipment, and labor to rebuild is a
tall order and one that is likely to divert significant
resources for years to come. While resolution and
funding remain unclear at this point, the need will be
realized in the foreseeable future.

Prices are likely to continue to trend upwards over the

second half of 2022. Uncertainty is still widespread and,
as demonstrated by the current changing patterns of
costs, novel issues are likely to emerge and disrupt
supply chains and pricing in the near term.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

11 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
3.
Mid-year analysis

Construction
labor update

Strong demand tempering rapidly at the end of the second quarter

Strong demand in the first half of 2022 was
undermined by the longstanding structural issues in
the construction labor market. Job openings were
consistently elevated even as hiring expanded above
pre pandemic rates and separations fell to extremely
low levels. In June 2022, unemployment fell to 3.7%,
just 0.1% above the national average and job
openings finally pulled back, dropping by 109,000
openings to 330,000. While down considerably from
the recent peak, openings are still in line with the
historical average.
As such, the pullback is likely to continue as firms
stabilize backlogs and plan for difficult times. As
confidence and expectations adjust, more
contractors are expected to stay on their current
employment trajectories and to cease aggressive
hiring. However, according to sentiment surveys, few
contractors are expecting to reduce their labor force,
with the majority intended to maintain current levels.
Limited separations in the latest JOLTS survey
support this sentiment, with considerably lower rates
of termination and quits across the industry.

Construction employment and openings

8,000 7.0%

Openings as % of employment
6.0%
Employment (thousands)

7,500
5.0%
7,000 4.0%
6,500 3.0%
2.0%
6,000
1.0%
5,500 0.0%
0

2
20

21
0

2
0

1
20

21

22
l-2

l-2
r-2

v-2

r-2

v-2

r-2
-2

-2

-2
p-

p-
n-

n-

n-
y

y
Ju

Ju
Ma

Ma

Ma
No

No
Ma

Ma

Ma
Se

Se
Ja

Ja

Ja

Construction employment Job openings

It is unlikely that the pullback will result in significantly lower demand side
pressure in the construction labor market, as the current volume and array
of work is sufficient to keep demand high for the next several years.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

12 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
 Wages lag inflation,
accelerated growth likely in
the second half of the year
Wage growth in the first half of 2022 was modest
as well, significantly outpaced by inflation.
Workers in the construction industry have
experienced real wage losses of roughly 1.9%
since the start of the pandemic. The gap widened
in the first half of 2022 for construction
employees. Though construction wages maintain
a premium over competing industries such as
logistics and warehousing, these have seen
stronger wage growth over the pandemic. On a
real basis, wages in in transportation and
warehousing are up roughly 1.3%.

$33.00

$32.00

$31.00

$30.00
Hourly wages

$29.00

$28.00

$27.00

$26.00

$25.00
Ma 0

Ma 1

Ma 2
No 0

No 1
0

2
0

1
2

2
-2

v-2

v-2

2
y-2

y-2

y-2
b-

b-
g-

g-
b

Au

Au
Fe

Fe

Fe

Nominal wage Real wage

Given the high availability, lower

training requirements, potentially
easier conditions, and a modestly
shrinking wage differential, these
industries are likely to attract
talent away from construction.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

13 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
 Labor pipeline will increasingly lag employment demand
1100
Based upon current spending per worker and

Inflation adjusted value Put in place per

forecasted spend by sector, the construction
industry is going to see strong need for workers in 1000
many subsectors, with the IIJA fueled need for

cosntruction employee
specialty laborers in the Heavy Civil Construction 900
and Engineering discipline being the most impacted.
800
However, the construction labor market does not
have the capacity to fill every job that is expected to 700
be added in the next few years. Historical rates of
expansion prior to the pandemic suggest that the 600
capacity to add workers is limited to between
200,000 and 250,000 per year. While the post- 500
pandemic period saw rapid reentry into the labor

Feb-20

May-21
Jun-18

Mar-22
Oct-21
Sep-19

Dec-20
Jul-20
Nov-18
Jan-18

Apr-19
force, the historical rate may be difficult to achieve
again given the aging workforce, competition, and
capacity of the existing specialty training pipeline. Nonresidential productivity Residential productivity

2000.0 As noted in the H1 2022 Construction Outlook,

1800.0 entry to the construction industry is below
1600.0 replacement levels relative to exits of older
Total employment (000s)

workers, especially in specialty trades. At current

1400.0
forecasts of incoming IIJA funds bumping public
1200.0 spending by 10% or more annually from 2024 on,
1000.0 the increased need for construction employment
800.0 equates to roughly 350,000 jobs from that
spending alone — well above capacity identified
600.0
in the historical record. Additional complications
400.0 exist as these will draw disproportionately from
200.0 the Heavy Civil Construction and Engineer
0.0 subsector due to non-building and infrastructure
projects being targeted. Nonsupervisory and
May-19

May-20

May-21

May-22
Sep-19

Sep-20

Sep-21
Jan-19

Jan-20

Jan-21

Jan-22

production employment remains down from the

pre-pandemic peak in the subsector despite
Heavy civil construction General building construction incredibly rapid growth in the last few months.
Foundation/exterior Building equipment
Finishing contractors

The largest impacts the labor situation will have are the continued wage
pressure and potential delays in projects. The favorable situation for labor is
expected to accelerate wage growth in the second half of the year, continuing to
pressure margins. Though outright cancellations have remained limited, delays
due to labor shortages are a nearly universal experience with no relief in sight.

Sources: Bureau of Labor Statistics Producer Price Index, Local Research

14 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Grading and revising our previous construction forecasts
How have our forecasts from the last Construction Outlook held up?
In our previous report, the H1 2022 JLL Construction Outlook, we laid out five key forecasts. Each of those five
forecasts is reviewed and assessed below.

Total construction costs | Grade: Near target

Original forecast: “Several major sources of uncertainty amidst high demand are likely to keep construction
costs growing at a rapid pace over the course of 2022. The net effect will be yet another above average year of
total construction cost growth, forecast to increase 8-12% over the next 12 months.”
Assessment: A new set of materials experiencing a surge in prices with no relief from last year's escalations has
pushed prices up roughly 6%, with bid prices up further as underlying costs continue to be priced in. This is
trending towards the high-end of our original forecast outlook for 2022. While further material stabilization is
possible, limited labor availability and stubborn inflation will continue to put upward pressures on costs and
bids catch up to inputs.
Revised outlook: As a result of the increased pressure, we are revising the cost outlook upwards
slightly, to the 10-14% range.

Construction labor costs | Grade: On target

Original forecast: “A recent surge in hiring has put national construction employment within 1.0% pre-
pandemic levels and further dropped industry-wide unemployment. Hiring has come at a high price, with
average wages increasing by 6% year-over-year or the highest rate recorded in 40 years. Looking ahead to
the next year, construction labor costs will continue to grow at a similar elevated rate. Continued labor
shortages, heightened demand, and elevated inflation are likely to drive wage increases in the 4 to 6%
range”
Assessment: At a 2.4% increase since the start of 2022, wages are trending towards the middle of our original
forecast. However, the year-to-date increase is well below inflation and the broader market increases in other
industries. With exceptionally tight unemployment and demand remaining strong despite recent pullbacks, an
unusually high second half of the year for wage growth is likely.
Revised Outlook: Given persistent demand and extremely limited supply of labor we are revising the
cost of labor up slightly for 2022, to a 6-8% increase year-over-year.

15 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
How have our forecasts from the last Construction Outlook held up?
In our previous report, the H1 2022 JLL Construction Outlook, we laid out five key forecasts. Each of those five
forecasts is reviewed and assessed below.

Construction material costs | Grade: Off target

Original forecast: “Intense demand and continuing supply chain issues are likely to keep select materials
costs growing rapidly. Materials costs are the lowest confidence forecast due to the wide range of inputs and
global supply chains bucketed into a single category. The net impact will be a wide range of price changes for
individual materials, with an average increase across all materials in the 10-12% range expected.”
Assessment: Net inputs to nonresidential construction are up 9.8% at the halfway point of the year, far
exceeding our conservative estimates of growth. While stabilization did occur for major items, a whack-a-mole
pattern of new increasing materials has driven up other costs sectors.
Revised outlook: While the pattern of increases is likely to slow, it has demonstrated the extensive
reach of cascading disruption and will cause material prices to exceed original expectations. As a result,
we are revising the forecast up slightly, to 12-18%.

Construction volume | Grade: On target

Original forecast: “Inflation-adjusted nonresidential and residential construction spending has declined
consistently since the pandemic began, driven downward by fewer new project starts in 2021. As new variants
of the COVID-19 pandemic emerged, expectations of full recovery have been frustrated and pushed back, with
the most harmed sectors not expected to return to pre-pandemic volume until 2023 in optimistic forecasts.”
Assessment: Inflation adjusted spending is seeing mixed patterns, with residential and select nonresidential
subsectors up on a year-over-year basis. Continued inflation and an emerging pullback are likely to continue to
moderate real growth for the next year, with 2023 acting as a recovery year and 2024 seeing widespread real gains.

Political implications | Grade: On target

Original forecast: “Following the passage of the 1.2 billion Infrastructure Investment and Jobs Act in late 2021,
as well as a potential 555-million-dollar climate change bill, the construction industry is primed to see a boon
as funds begin to flow in the coming years.
Assessment: Funds from the IIJA have begun to flow in a trickle in the first half of 2022. Given long planning and
approval phases for the projects targeted, widespread construction starts are not anticipated until mid-2023 at
the earliest, with the majority of funding coming 2024 and beyond. Additional federal funding is in the pipeline as
well, further boosting the incoming impact.

16 | Construction Outlook | United States | H2 2022 © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Contact Research:

Andrew Volz
Construction Research Lead
Americas Research
+1 312 228 3273
andrew.volz@am.jll.com

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