Labor Struggling to Keep Pace as Contracts Continue Surge

by JOHN GREGERSON and ROB McMANAMY | March 8, 2016

If not quite in peak form yet, U.S. nonresidential construction activity nevertheless has returned to levels not seen since before the Great Recession brought work nationally to a screeching halt in 2009. And the ongoing, prolonged surge in new contracts is such that some areas now actually find themselves slowing down to wait for the labor supply to catch up.

“The overall picture for construction employment is very positive, with robust job growth and very little unemployment,” says Ken Simonson, chief economist for the Associated General Contractors of America. “Yet it appears that many nonresidential construction firms have run out of people to hire.”

“It appears that many nonresidential construction firms have run out of people to hire”

— Ken Simonson, AGC Chief economist

Of course, daily issues of supply and demand have historically defined this most cyclical industry. "If construction firms need help finding people, believe me, we can help," says Andy Jansen, cofounder of Hard Hat Hub, an online career resource and industry job search engine based in Chicago. "Finding qualified people is what we are about," he adds.

Jansen will speak on recruiting and hiring issues next month at BW's CEO Tech Forum.

In January, nonresidential construction spending totaled $700 billion, a 12.3% increase in year-over-year comparisons and the industry's strongest monthly performance since March 2009, according to data released by the U.S. Census Bureau and interpreted independently by Associated Builders and Contractors (ABC). For its part, AGC placed the increase a bit lower, at 11.5%.

“There were solid gains in apartment, nonresidential and highway construction,” noted AGC's Simonson, who observed that nearly every nonresidential segment increased in year-over-year comparisons. January's greatest private sector gains were in manufacturing, which climbed 11%, followed by power, including oil and gas pipelines, which rose 10.3%. Meanwhile, in the public sector, spending increased 13% in 12 months, with highway and street construction leaping 34%.

“Although favorable weather may have boosted these results, demand for many types of projects remains strong despite worries that the overall economy has slowed,” Simonson adds.

For that very reason, ABC was somewhat less sanguine about January's gains. “After several months of relatively weak nonresidential construction spending, [the January data] were most welcome,” says ABC Chief Economist Anirban Basu. However, in the long term, “The industry’s overall outlook remains murky,” he said, citing a weak global economy, diminishing corporate profitability and the potential for a corresponding slowdown in employment and consumer spending to jeopardize economic recovery.

“There is no indication that the ongoing nonresidential construction recovery is in any way jeopardized”

— Anirban Basu, ABC Chief Economist

Additionally, the nonresidential sector added only 2,800 to 3,500 jobs in February in year-over-year comparisons. By comparison, nonresidential specialty trade contractors collectively added 31,000 jobs in the first two months of 2015. Basu downplayed the declines, citing current strength in nonresidential construction spending. “There is no indication in [the data] that the ongoing nonresidential construction recovery is in any way jeopardized,” he says.

As a result, AGC officials have called on elected and appointed officials to undertake measures outlined in AGC's Workforce Development Plan, including providing support for high schools to inaugurate construction-specific education programs. “Growing demand for construction is only helpful if firms have enough workers to perform the work,” says AGC CEO Stephen E. Sandherr. “Without a better pipeline for recruiting and preparing new workers, we will have difficulty completing projects on time because they don’t have enough workers on staff,” he warns.

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