US domestic sawmill capacity also contributed to record-high lumber prices and price volatility in 2021.
The failure of domestic sawmills to boost housing output in the face of ongoing strong home buyer demand was a primary factor that contributed to record-high lumber prices and volatility in 2021, according to the NAHB. While labor has been a reason cited for the lack of U.S. lumber production, NAHB analysis indicates employment in the sawmill industry is higher than a year ago.
As of October 2021, the most recent data available, sawmill employment was 90,100. This is a 2.4% increase from October 2020, or a net gain of 2,100 jobs. Residential construction employment was up 4.0% or 118,500 net jobs over the same period.
With the increase in workers, sawmill output did increase over the 12 months ending September 2021, albeit along a choppy trend. Data from the Bureau of Economic Analysis demonstrates that the seasonally adjusted rate of sawmill output in September 2021 (the most recent available) was 1.2% higher than in September 2020. However, output in Q3 2021 was 1.3% lower than it was in Q3 2020.
Total sawmill output in 2020 was up 3.3% compared to 2019 due to a year-end upswing in production. This uptick continued over the first nine months of 2021 as output through September was 3.1% higher than it was over the same period in 2020. Compared to 2019, however, output was just 1.6% higher.
The 2020 increase in output was insufficient to keep up with the demand from residential construction and this has remained the case in 2021. The growing gap between single-family starts and sawmill output, particularly in 2020, is the reason for the dramatic increase in lumber prices. It is important to keep in mind that single-family starts were up 13.6% in 2020 and are up 15.7% year-to-date in 2021.