Construction association officials voice concerns over tight labor market

Construction association officials are raising concerns over higher project costs and increasingly tight labor markets following the latest release of industry employment data.

Construction employment increased by 21,000 jobs in June and by 224,000, or 3.2 percent, over the past 12 months, while the number of unemployed job seekers with construction experience fell, according to recent data released by the U.S. Bureau of Labor Statistics.

 “Construction firms continue to go to great lengths to recruit and retain workers during one of the tightest labor markets many of them have ever experienced,” says Stephen E. Sandherr, the chief executive officer of the Associated General Contractors of America (AGC). “Making matters worse, relatively few school districts offer the kind of career and technical education programs that signal to students that they should explore careers in high-paying fields like construction.”

Sandherr notes that the unemployment rate for job seekers who last worked in construction declined to 4 percent from 4.7 percent in June 2018, and the number of such workers decreased in the last year from 466,000 to 390,000.

Another government series showed that the number of job openings in construction, last reported for May, totaled 360,000—the highest May total in the 19-year history of that series.

Most of the construction job growth during the past month and year came from the nonresidential construction sector. Nonresidential contractors added 14,900 jobs in June and 146,700 jobs during the past year. Meanwhile, residential contractors added 6,000 jobs this past month and 78,000 jobs between June 2018 and June 2019.

“In general, nonresidential construction spending tends to lag the broader economy by 12 to 18 months,” says Anirban Basu, the chief economist for Associated Builders and Contractors (ABC). “And as the broader economy continued to perform well during the first half of the year, even though economic growth slowed during the second quarter, this implies nonresidential construction spending growth will remain in place well into 2020 and likely beyond.”

Basu is optimistic about the number’s indications for the overall U.S. economy but warned about the ongoing hiring challenges facing contractors.

“Today’s employment numbers indicate the economy is not slowing nearly as quickly as data suggested earlier this year, which is promising news for contractors,” Basu says. “With the U.S. economy now in the midst of its lengthiest expansion in history and many economists predicting a recession in 2020 or 2021, construction firm leaders are searching for any indication that the current economic and construction spending growth cycles are nearing the end. That said, today’s employment numbers suggest the economy will retain plenty of momentum into 2020.

“In short, the industry is still strong. Finding and retaining skilled workers remains a primary issue, implying that compensation growth will continue to increase. This is a challenge that construction firms share with firms operating in many other industries, which means that the cycle of wage growth coupled with robust consumer spending remains firmly in place.”

Average hourly earnings in construction—a measure of all wages and salaries—increased 3.2 percent over the year to $30.73. That figure was 10.1 percent higher than the private-sector average of $27.90, Sandherr notes in his analysis.

AGC officials say industry employment gains are coming despite an “extremely tight” supply of available, qualified workers to hire. They note that in addition to raising pay and other benefits, many firms have increased their investments in training as they recruit workers with little to no prior experience in construction. AGC says federal officials could help attract more people into high-paying construction careers by boosting funding for career and technical programs in schools and enacting immigration reform that allows more people with construction skills to legally enter the country.

“The nation’s education system continues to produce too many over-qualified baristas and not enough qualified bricklayers and other craft construction professionals,” Sandherr says. “As a result of these educational imbalances, too many young adults are struggling to pay off college debts, while too many construction firms are struggling to fill job positions that pay well and don’t require costly degrees.”