Economic Outlook

This week on the Bright Ideas series presented by Acuity Brands®, Catherine is joined in the studio by Josh Bone: the Executive Director of ELECTRI International.

 

ABOUT ELECTRI INTERNATIONAL

ELECTRI is a research and education organization for the electrical construction industry, and Josh has come to share an updated economic outlook for electrical distributors and contractors.

The company was established in 1989 by the National Electrical Contractors Association (NECA) to conduct research for electrical contracting professionals. It all started when a group of contractors met and agreed they needed to look at the future of their industry and invest in it. Over time, the foundation evolved to include education, and also to recruit new people into the industry. Today, anyone can go to electri.org and download their research, which is specifically designed for electrical contracting professionals.

 

Every year, Electri International releases an economic outlook report with some particular key indicators, such as the Associated General Contractors of America (AGC) and the Architecture Billings Index. In February of 2021, the ABI index jumped from 44.9% to 53.3%, which is a good sign that design work is making a rebound.

Additionally, labor hours are a major factor in ELECTRI’s reports. They collect information from over 4,000 contractors -made up of NECA members and participants in ELECTRI’s National Electrical Benefit Fund (NEBF); and they can use that data to discern trends and learning opportunities based on what’s happening all around the United States.

 

PREDICTING UPCOMING QUARTERS WITHIN THE ELECTRICAL MARKET

Even with all of this data, there’s still a lot of uncertainty about what the second half of 2021 will look like. However, there’s been a noticeable increase in optimism in contractors from January to February alone, as their backlogs have started to fill back up again in what looks like a fairly bullish market. Q3 and Q4 look to be very strong and may set up 2022 to be a strong year.

While there is a positive trend, some sectors will have a tougher time. Hospitality is going to struggle to make a rebound from the pandemic, and other areas of entertainment like amusement parks won’t fare much better. However, there is much hope for industrial work: manufacturing, warehousing, and distribution markets seem to be improving.

However, there’s one corner of the market that has been on everyone’s mind since even before the pandemic hit in 2020, and has only gotten worse in the months since: the labor shortage. There just aren’t enough people to do the work that’s needed right now, and it’s an issue the entire field is going to have to deal with for some time.

While problematic for some employers, the labor shortage does provide ample opportunity for students fresh out of high school and college who want to build a career and climb the ladder swiftly. As industry veterans increasingly retire and Gen X doesn’t have the numbers to replace them, younger generations can fill those gaps and rise in the ranks –– from office administration or apprenticeships to CEOs running $100M annual electrical contracting businesses.

Construction has so much to offer with that upward mobility that it’s not even based on anyone’s education or origins: it’s all about work ethic and experience.

 

SHIFTS IN THE ELECTRICAL CONTRACTING INDUSTRY

Another major transition taking place in the electrical industry right now is the shift from providing a commodity into providing consultation services. Many of today’s new and emerging technologies require certain skillsets and expertise.

So, instead of trying to always hold the title of being the cheapest and fastest in the industry (which is difficult, stressful, and not always profitable to maintain), electrical contractors can and should make the shift into being consultants. They can leverage data, monitor service aspects as well as design and construction, and help builders create more renewable and sustainable buildings.

With all of the high-tech sensors and smart lighting equipment being installed in modern sites, contractors have ample opportunity to collect data for a building’s entire life cycle.

ELECTRI also seeks to work closely with the U.S. government to support more smart infrastructure in the future, and so far the International Brotherhood of Electrical Workers (IBEW) has been sharing positive news regarding their conversations with the current administration.

 

FINISHING THE SECOND HALF OF 2021 STRONG

All in all, the most important thing for electrical distributors and contractors to do right now is to learn everything they can, as well as specialize and diversify their businesses.

2020 proved that having all your eggs in one basket is a dangerous corporate strategy. Diversification of work is a good thing because it usually moves companies out from being just a commodity into consultation for other areas such as alarm systems, low-voltage, or lighting controls. Those are great areas for growth where distributors can influence owners and general contractors to see them as more of a partner.

Electrical companies also need to focus on increasing their productivity and looking to the future of electrical contracting to maintain a competitive advantage. Much of this industry has moved to working off-site, but electricians will still need the knowledge of the manufacturers and distributors early in the process–– especially on more complex jobs. While difficult, this will ensure that everyone is able to work together as a united team.

To learn more about ELECTRI, visit their website electri.org. Next week, don’t miss out–– Catherine will be joined by the newly-appointed president of Acuity Brands Lighting.

 

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