Hurricane Katrina Effects Cost of Labor and Building Materials

As levies broke and water from Lake Pontchartrain flowed into downtown New Orleans and merged with Lake Maurepas, workers in the construction industry readied themselves for gas, lumber and labor prices to soar.

In past hurricanes, the cost of lumber jumped to an average of 20 percent in the weeks following. Already Hurricane Katrina has caused a 5-10 percent hike in lumber prices across the nation, which will soon steady itself only to spike again during reconstruction.1

Most of America’s lumber supply is located in the South and is currently unavailable as a result of the hurricane. With Katrina’s fury resonating throughout the construction industry, damaged southern mills and gas hikes have become a construction company’s nemesis. As the Gulf Coast prepares for an extensive rebuilding process, the U.S. may see a dramatic change in the labor market.

“The biggest challenge to the construction industry may not be the cost of gas,” said Dale Scott of SIKON Construction in Boca Raton, FL. “I personally feel the real problem we face is the drain on an already stretched-thin workforce. When the rebuilding of the Gulf Coast starts, it will probably deplete the labor force throughout the entire eastern half of the country.”2

At a time when building materials are already costly and labor is scarce, recent price increases have owners seeking construction management firms with top-notch estimating and engineering divisions to effectively value-engineer upcoming projects to get the highest-quality facility for their dollar.

“Projects are going to have to be planned at the best possible value for the dollar even more so,” said William A. Berry Superintendent Ernie Carrier. “Hurricane Katrina has sent already costly construction materials even higher … we are preparing for anything.”

McGraw-Hill Construction’s Chief Economist Robert Murray is calling Hurricane Katrina the “costliest natural disaster in U.S. history,” placing a stop on numerous multi-million construction projects such as the $275 million expansion to the New Orleans Convention Center that was slated to begin this fall.

“The major uncertainty relates to the price and availability of building materials, which means in the near term that the construction industry will continue to adjust to a higher cost structure,” said Murray.3

1.WNDU TV News; South Bend, IN
2.Bizjournals™; Kent Bernhard, Jr.
3.Construction.com