With plenty of work in clear view and more expected, the construction industry is optimistic about the coming year, according to the 2017 Construction Hiring and Business Outlook report presented by the Associated General Contractors of America (AGC) in conjunction with Sage.
“The construction industry has relatively high expectations for 2017 as most firms expect public and private market segments to expand,” says Stephen Sandherr, chief executive officer of the AGC. “It would appear that their optimism is based, in part, on the assumption that the economy will continue to grow next year and that the incoming Trump administration will enact significant new investments in a range of public works projects, especially for highways and public buildings.”
AGC economist Ken Simonson concurs, citing that five times as many Outlook survey respondents (46 percent) expect the overall construction market to grow as those who expect it to shrink (9 percent). Contractors expect demand for construction services will be higher this year in each of 13 major market segments, he explains, especially in the hospital and the retail, warehouse, and lodging markets.
Even with the optimism, the industry is not without its challenges, according to the report.
Labor remains the number one issue
“The biggest concern for contractors is not where will they find work, but where will they find the workers,” says Simonson. Seventy-three percent of firms report that they are having a hard time finding qualified salaried and craft workers. Most (75 percent) predict labor conditions will remain tight, or get worse, during the next 12 months.
The survey also asked contractors to indicate the biggest issues they face today. Not surprising, labor-related concerns also headed that list:
- 55 percent are worried about worker shortages
- 46 percent cited worker quality
- 42 percent are concerned with rising direct labor costs
In addition to labor, Outlook respondents are worried about increased competition for projects (48 percent) and growth in federal regulations (41 percent).
Dealing with the qualified worker shortage
Many contractors seem to be taking matters into their own hands to address the labor shortage. During a presentation on the Outlook results, Rose Conti, director of interiors for Lee Kennedy Co Inc., said her company is trying to be more creative in how they attract and retain employees. For example, the firm works closely with a local college, hiring even before students graduate. It also has a mentoring program in place.
Many firms are also investing in training and development programs. “Contractors are concerned with the caliber of the training programs out there and even the existence of them in many markets,” says Simonson. Fifty-two percent of respondents plan to increase their investments in training and development this year compared to last year.
To compete for a shrinking pool of workers, most construction firms are also increasing pay or benefits. More than half of firms (52 percent) say they have increased base pay rates, 35 percent are providing incentives and/or bonuses, and 28 percent report they have increased contributions to employee benefits.
Getting strategic about technology
“With competition heating up for both projects and qualified staff, construction companies are relooking at how technology can help them meet these challenges head on,” says Jon Witty, vice president and general manager for Sage Construction and Real Estate. This year’s Outlook showed 47 percent of contractors currently have a formal IT plan that support business objectives and an additional seven percent look to create a formal IT plan in 2017.
“As optimistic as the industry is about 2017, there are still significant challenges facing the industry, including growing workforce shortages and increasing costs for health care and regulatory compliance,” says Sandherr. “Yet the bottom line is that 2017 promises to be a good year for the domestic construction industry.”
Check out highlights from the 2017 Construction Hiring and Business Outlook. View the video.