Constructor - March/April 2014 - (Page 29)

SIMONSON SAYS Contractors Show More Optimism Heading into 2014 BY KEN SIMONSON CHIEF ECONOMIST AGC OF AMERICA CON TR ACTORS A RE MORE U PBEAT ABOUT THE current year than they have been since the recession ended in 2009. But their optimism is tempered by worries about rising costs for materials and health care, labor availability, and possible new regulatory burdens. Those are some of the key take-aways from an annual survey AGC released on Jan. 21. More than 800 members from every state and the District of Columbia answered the online questionnaire in December or early January. In contrast to prior years, when most respondents thought the construction market would not begin to grow for two years or more, a plurality of this year's respondents - 37 percent - picked 2014 as the year the market would grow. Another 32 percent picked 2015. In all but one of 11 market segments, contractors who said they expect the dollar volume of projects they compete for would rise in 2014 outnumber those who said volume would shrink. Contractors have an especially positive outlook for private sector segments. For five of those segments, at least 40 percent of respondents expect the market to expand and fewer than 20 percent expect the market to decline in 2014. The difference between the optimists and pessimists - the net positive reading - is a strong 28 percent for private office, manufacturing and the combined retail/warehouse/lodging segments, and 25 percent for power and hospital/higher education construction. Among public sector segments, optimism is greatest regarding demand for new water and sewer construction, with a net positive of 17 percent. Contractors are mildly optimistic about the market for highway construction, with a net positive of 10 percent. Respondents are almost equally divided regarding the outlook for the other four segments, ranging from net positives of 5 percent for public buildings, 4 percent for schools, 3 percent for transportation facilities other than highways, to a negative of 2 percent for marine construction. As for costs, 90 percent of construction firms report they expect prices for key construction materials to increase in 2014. Most, however, expect those increases will be relatively modest, with 43 percent reporting they expect the increases to range between 1 and 5 percent. Meanwhile, 82 percent of firms report they expect the cost of providing health care insurance for their employees will increase in 2014. Despite that, only 1 percent of firms report they plan to reduce the amount of health care coverage they provide. Regarding labor availability, 62 percent of responding firms report having a difficult time filling key professional and craft worker positions. And two-thirds of firms expect it will either become harder or remain as difficult to fill professional positions, whereas 74 percent say it will get harder, or remain as hard, to fill craft worker positions. Those worker shortages are already having an impact. Fifty-two percent of firms report they are losing construction professionals to other firms or industries and 55 percent report they are losing craft workers. As a result, a majority of firms report they have improved pay and benefits to help retain qualified staff. One reason they are likely worried is that nearly half of the firms believe training programs for new craft workers are poor or below average. Adding to their challenges, 51 percent of contractors report that demand for their services is being negatively impacted by federal funding cuts, new federal regulations and/or Washington's inability to set an annual budget. Most economists expect the overall economy to continue growing modestly in 2014. This may finally be the year that contractors feel they are part of the expansion. ◆ MA R C H / A P R I L 2 0 1 4 | 29

Table of Contents for the Digital Edition of Constructor - March/April 2014

Editor’s Note
President’s Message
CEO’s Letter
Wise Investment
Simonson Says
Water Resources Development Act Addresses Critical Infrastructure Needs
Legislative and Regulatory News
Can-Do Attitude Meets a Job Well Done
Technology Toolbox
The Mobile Gold Rush
Index to Advertisers
Final Inspection

Constructor - March/April 2014