OUR THOUGHTS ON:

Postcard from the PICPA's Annual Construction Update

Audit|Construction

By Patrick Kerns

I recently attended the Pennsylvania Institute of Certified Public Accountants (PICPA) annual construction update. The update focused on several topics, including an economic update, signs to look out for with problem jobs, trends in human resources, cybercrime and a mock review of a litigated contract dispute.

The speakers for the economic and human resources update both focused on the tightening labor market and how it can impact employers. In August 2016, the most recent month available, net construction employment increased by nearly 23,000 jobs on a national scale. Locally, it was a bit more mixed, but the message remains that it is difficult to find good people. This coupled, with one of the lowest participation levels in the labor force by working age individuals, has put the squeeze on employers when it comes to finding qualified individuals. This will continue to challenge employers for a multitude of reasons, and in the short term, may continue to put upward pressure on wages. This will challenge employers who are starting to seeing increases in the costs of their raw materials, and who will continue to put pressure on already constrained margins.

As part of the economic update, we all heard that the hard fought recovery of the past few years might be coming to an end. Leading indicators suggest that 2017 and 2018 will be choppy from an economic perspective and could lead us into another downturn. Time will tell of course, but it was certainly noted that the economic recovery was one the longest in recent history and may now face headwinds due to a broader global economic slowdown.

As we saw during the great recession, the impact of a downturn can be uneven and it will not impact all companies the same. Construction companies should keep a close on their key indicators of financial strength, costs and liquidity to help them weather any potential economic downturn. 

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