worker shortage

56% of Contractors Nationwide Say Worker Shortage Trumps Supply Chain Woes

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

At Construction Executive’s Dec. 14 economic update and 2023 forecasting session, Associated Builders and Contractors Chief Economist Anirban Basu said the U.S. economy’s “overheated” condition is likely to continue manifesting a prolonged and profound worker shortage in construction, and is also making it tough for estimators to accurately price future builds.

By “overheated,” Basu is referring to a fast-growing economy that is reaching the limits of its capacity to meet existing demand.

The Federal Reserve’s action and inaction, unchecked inflation during 2021 and 2022 and relative scarcity/supply chain delays of construction materials are additional factors contributing to contractors’ challenges during 2023 and beyond, he said.

During the national ABC forecasting webinar earlier this month, contractors were polled as to the greatest challenge impacting their firms at the close of 2022. A total of 56 percent identified skills/worker shortage as the number-one impediment, followed by 28 percent who ranked supply chain and/or materials issues as their biggest hurdle.

“Oil and natural gas prices have soared during 2022, inflation has increased substantially and supply chains remain unpredictable,” said Basu. “And yet, contractors’ leading challenge – even more than it was a year ago – is finding enough workers to get the job done. I find that remarkable. As an economist, I would’ve expected to see some impact on the demand for construction services, but it’s still not that way. It still speaks to a market that is more characterized by demand than by capacity to meet that demand.”

Year 2022 has also been defined by a series of profound interest rate increases, Basu said, adding that the Federal Reserve did not raise rates at all during 2021, leaving inflation to broaden as a result of numerous economic events and pressures. “We are seeing the worst of inflation behind us,” he said, “but inflation will continue to remain problematic in 2023.”

Russian’s invasion of Ukraine in February 2022, he noted, sparked the global market’s response of soaring prices in energy and other construction inputs. While the U.S. inflation rate is more tempered now at year’s end than it was in June 2022, Basu said inflationary pressures have been transmitted from one period to the next, creating somewhat of a self-fulfilling prophesy for the construction industry as contractors and others build inflationary expectations of what transpired in 2022 into their project cost estimates for 2023 and beyond.

“Public-sector construction has a good outlook for the next five years at least,” he said. “But privately financed construction will likely continue to face capacity issues in terms of human capital.”

A leading upstream indicator going forward into 2023 and 2024, according to Basu, will be the volume of work that flows to design firms next year. “Contractors are saying they still have healthy backlogs of work through 2023,” said Basu. “But if we see upstream design firm activity dry up, then we’ll anticipate that 2024 isn’t going to be as strong for contractors.”

Demand throughout 2023 for construction of data centers, fulfillment centers and healthcare builds is expected to remain robust, according to Basu.

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Industry Still Struggling to Find People, AGC Survey Says

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The Associated General Contractors of America’s latest workforce survey reveals that 77 percent of construction industry job candidates either lack the necessary skills or cannot pass a drug test.

A total of 1,266 individuals coast to coast representing all sizes of companies and all sectors weighed in on the survey during July and August.

According to AGC Chief Economist Ken Simonson, 93 percent of construction firms surveyed reported they have open positions they’re seeking to fill. Among those firms, 91 percent are having trouble filling at least some of those positions.

“Construction workforce shortages are severe and having a significant impact on construction firms of all types, all sizes and all labor arrangements,” Simonson said. “These workforce shortages are compounding the challenges firms are having with supply chain disruptions that are inflating the cost of construction materials and making delivery schedules and product availability uncertain.”

More than half (55 percent) of Missouri respondents indicated that their construction firm’s headcount has increased over the past year. Estimating personnel are the most needed salaried positions, according to Missouri firms, followed by project managers/supervisors and engineers.

Regarding the direst needs for craft workers, 91 percent of Missouri construction respondents identified concrete workers and carpenters as the most sought-after tradespeople, followed closely by cement masons and laborers.

Missouri’s surveyed response to the problem of filling available construction industry positions of all types tracked closely with the national statistic. Seventy-six percent of Show-Me State respondents identified job candidates’ lack of transferable job skills and inability to pass a drug test as the greatest barriers to hiring.

A total of 89 percent of those responding from Missouri companies of all sizes said their firm has increased base pay rates and/or benefits in the past 12 months. Eighty-two percent of those surveyed who work in Missouri reported schedule delays due to longer lead times, material shortages or both. More than half (54 percent) said upcoming projects have been canceled, postponed or scaled back due to increasing costs.

For more detail on the AGC’s latest construction industry workforce survey results, see https://www.agc.org/news/2022/08/31/construction-workforce-shortages-risk-undermining-infrastructure-projects-most-contractors-struggle.

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Construction Employment Stalls in April, Materials Costs Rise Again, Inventories Shrink

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The level of construction employment remains virtually unchanged in St. Louis and across the U.S. as commercial and residential contractors contend with a prolonged scarcity of able workers and a still-choked building materials supply chain.

Associated General Contractors of America Chief Economist Ken Simonson says finding enough workers continues to be a feat, as reflected in workforce statistics from April. Augmenting the people shortage, he adds, are problems in getting stable prices and reliable deliveries of key materials.

“Contractors are experiencing unprecedented intensity and range of cost increases, supply-chain disruptions and worker shortages that have kept firms from increase their workforces,” said Simonson. “These challenges will make it difficult for contractors to rebound as the pandemic appears to wane.”

Construction employment in the U.S. during April totaled 7.45 million, matching March’s level but 2.6 percent below the most recent peak in February 2020. Simonson said the number of former construction workers (768,000) who were unemployed in April dropped by half from one year ago, and the sector’s unemployment rate fell from 16.6 percent in April 2020 to 7.7 percent last month.

“The fact that (construction) employment has stalled – despite strong demand for new homes, remodeling of all types and selected categories of nonresidential categories – suggests that contractors can’t get either the materials or the workers they need,” Simonson said, noting that many firms are reporting backlogs and rations of key materials.

Still in short supply, according to the Institute for Supply Management’s latest survey report, are steel and steel products (for five months now), PVC products (a three-month shortage), lumber and circuit breakers.

Price spikes continue relative to copper, wire, oriented strand board, lumber, wood products, resin products, PVC products, steel, diesel, aluminum, vinyl windows and roof shingles.

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