Constructor - May/June 2014 - (Page 40)

SIMONSON SAYS Construction Grows as Do Worries About Worker Availability BY KEN SIMONSON CHIEF ECONOMIST AGC OF AMERICA THE CONSTRUCTION INDUSTRY STARTED 2014 on an upswing despite unfavorable weather in many parts of the country. The outlook for the year as a whole looks generally favorable - but only if contractors can find enough workers. In January, construction spending hit the highest level since March 2009 and grew at the fastest rate since 2006. In February, construction employment climbed to the highest total since June 2009. Spending and hiring have been rising almost continuously for three years, suggesting that the industry's recovery is solid, though far from spectacular. Both numbers are still more than 20 percent below the peak of eight years ago. Growth has been widespread by segment and geography but not uniform. Private residential and nonresidential construction spending has grown yearover-year since mid-2011, while public construction has been shrinking steadily since 2010. States with rising construction employment compared to year-ago levels now outnumber states with falling employment by roughly four to one. Yet, 40 constructor | M AY/ JU N E 2014 as of January, only two states - North Dakota and Oklahoma - had exceeded their pre-recession peaks in construction employment. Why, then, are so many contractors already reporting shortages of skilled labor and why are so many more anticipating shortfalls? There appear to be three main contributing factors: the depth and duration of the downturn, competition from other industries, and unfavorable demographic changes. Construction suffered a deeper and longer drop in employment than any other sector. Employment topped out in April 2006 and didn't start rising again until February 2011, almost five years later, after a loss of 2.3 million jobs. Three years later, the industry had added back fewer than half a million workers. As a result, many - if not most - of the others have retired, returned to school, left the workforce or gone to work in other sectors. Meanwhile, employment declined in the rest of the economy only from January 2008 to February 2010, meaning that laid-off construction workers had a better chance of finding work elsewhere through most of 2006, 2007 and 2010. Even now, when construction is adding jobs at a faster rate than the overall economy, there are regions - such as the oil and gas fields of Texas, North Dakota and other states - where contractors are being outbid for experienced workers. The demographic problems for the industry began before the recession and have intensified since its end. Recently, the number of young people entering the workforce has fallen short of the number retiring or nearing retirement. In addition, construction has historically relied more on veterans as a share of its workforce than have other private sectors. As U.S. engagement in Iraq and Afghanistan winds down and the size of the military shrinks, so does the number of veterans returning to the civilian labor force, leaving fewer potential recruits for construction. Contractors will need to take a variety of approaches to deal with the scarcity of skilled workers. Rates of base pay, overtime, benefits and bonuses are likely to go up, improving the financial attractiveness of construction work compared to alternatives. Some companies will use more sophisticated equipment, offsite manufacturing and assembly, or other techniques as substitutes for hard-to-find skilled craft workers. In other cases, building information modeling, better scheduling or other working condition improvements will enable construction to avoid idle hours, rework or costly turnover. And employers will need to step up their involvement with school, college and apprenticeship programs to draw younger workers into the industry. Construction spending should increase by 8 to 10 percent in 2014, roughly double the 4.9 percent growth rate from 2012 to 2013. Employment should grow by 250,000 to 350,000 workers - again, roughly twice the 156,000 employees added from December 2012 to December 2013. But contractors will have to work hard and smart to attract that many workers in a labor market no longer flush with unemployed, experienced hardhats pining to come back to construction. ◆

Table of Contents for the Digital Edition of Constructor - May/June 2014

Editor’s Note
President’s Message
CEO’s Letter
Labor Pains
Immigration Reform: Good for the Industry, Good for the Economy
2014 Alliant Build America and AGC in the Community Awards
From Here to There
Simonson Says
AGC in Action
Technology Toolbox
2014 Equipment Directory
Index to Advertisers
Final Inspection

Constructor - May/June 2014