Construction Hiring Looks Strong

Companies are increasing pay and benefits to retain and recruit qualified staff.

Against quite a shaky stock market that suffered havoc the first few days of 2016, some great news was published recently by the Associated General Contractors (AGC), which released the results of a significant report to deal with the challenge of hiring new construction workers in the current tight labor market.

The report concludes that 71% of construction companies say they will increase their headcount in 2016, and the construction industry will continue to recover as many companies add employees amid growing demand in private and public sector construction markets.

However, our industry faces a number of challenges that can dampen the recovery: workforce shortages, the growth in federal, state and local regulations, and rising health care costs. While these factors all represent headwinds, the biggest challenge companies will continue to cope with is worker shortages, their optimistic sentiment notwithstanding.

Seventy percent of companies are having a hard time finding qualified workers, including salaried and craft professionals. And 69% of respondents predict that labor conditions will remain as tight, or get worse, during the next 12 months. This is led by the carpentry crafts, with 45% reporting shortages, followed by framers at 25%; this means 70% of all companies report shortages in the carpentry trades. These are followed by general laborers, tile setters, and drywall labor. Concrete labor follows right behind that, with 19% of companies reporting shortages in this particular skill.

Many companies are increasing their pay or benefits to retain or recruit qualified staff. For example, 49% have increased base pay rates, 30% are providing incentives and/or bonuses, and 23% have increased contributions to employee benefits. Another 15% are considering increasing pay and/or benefits in the near future to cope with worker shortages.

Contractors expect 2016 to be a mostly positive year, as most expect key market segments to expand or remain stable. Yet their enthusiasm is tempered by tight labor conditions, new and relatively inexperienced workers will pose new safety challenges, the cost of complying with regulations will grow, and their health care costs will rise again.

Loosening credit

Another factor driving positive sentiment is that credit and lending conditions continue to improve for construction companies and remain stable for developers. Only 4% of companies are having a harder time getting bank loans compared to a year ago, which is down from 7% last year, and 9% in 2014. Credit conditions appear stable for developers as well, with a mere 24% noting that credit conditions have caused their customers to delay or cancel projects.

Considering a host of other economic indicators, including construction spending and hiring data that AGC closely tracks, contractors should be optimistic. Construction spending continues to expand at rates not seen since before the Great Recession a decade ago, and construction employment has been steadily increasing nationally, with gains being made in most states and in most metro areas for more than two years now. This all points to our belief that there is plenty of runway still ahead of us in this recovery. TCP

 

 

Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.