Strong Conditions in the Construction Economy Are Hampered by Labor Shortages

labor shortage, skilled labor

The road back from the disruption caused by COVID-19 continues to be a rocky one, filled with twists and turns. Even as mask mandates and other pandemic policies begin to ease, concern still lingers about future variants and other unforeseen challenges.

Considering all hits the economy has weathered in the past two years, the overall conditions for commercial construction have proven to be quite resilient. After taking a downward turn in 2020, the construction economy has bounced back reasonably well. Demand for projects remains strong, and financing continues to be favorable, even with rising inflation and potential interest rate hikes.

This is all well and good, but that doesn’t mean there aren’t significant challenges. In the end, buildings are designed and built by people, and right now finding those people has become a real struggle. A lack of labor is causing difficulties and delays for firms in all parts of the process. Contractors, manufacturers and architects alike face many challenges filling positions.

“Both residential and nonresidential construction firms have been adding employees for the past six months, but they are having a hard time finding qualified and willing workers,” explains Ken Simonson, chief economist with the Associated General Contractors of America. “At the end of January, there were 384,000 unfilled positions in construction. That’s an all-time high for January and far above the number hired during the entire month. It suggests that contractors would have hired more than twice as many workers as they were able to find.”

“There is a severe labor shortage throughout the economy, and construction is one of those industries that has been hit hard in terms of having a deficit of workers,” says Kermit Baker, chief economist with the American Institute of Architects. “It looks like it is only going to get worse because the nonresidential construction market has actually been fairly weak over the past few years because of the pandemic and is slated to see a pretty healthy recovery in 2022. As it recovers, I think that will underscore the fact that there is a very serious problem trying to find sufficient construction workers.”

Competitive Conditions

With a low unemployment rate in the broader economy and labor shortages in just about every industry, construction finds itself having to compete even harder to find quality candidates to fill positions in the office, field and factory.

“The construction labor market is extremely tight and competitive,” says Jason P. Lien, P.E., executive vice president of EnCon United, producers of precast/prestressed concrete systems. “Our plant labor candidates have an abundance of opportunities in general construction, hospitality, and food and beverage, each with similar wage structures and some offering stronger benefits packages. In previous times of high economic growth, we were constrained by available plant capacity, but today we are constrained by labor in the plant, both experienced and inexperienced.”

“Contractors are losing labor because they can’t acquire material to get the work done, and if they lose a crew member to a competitor, they will struggle to fill that position,” says Jennifer Ford-Smith, chair of the EPDM Roofing Association and head of marketing and product management for Johns Manville. “Labor is a true constraint and will continue into the future if we can’t find ways to improve recruitment into the industry.”

“We know that labor shortages were an issue for the trades, even before COVID. But right now, our greatest challenge is hiring in our offices,” says Andy Holub, vice president, pre-construction and special services director for Clune Construction, a national general contractor. “I can say with certainty that the pandemic had a heavy hand in this. The Great Resignation has left a lot of holes
to fill. Employees experienced a different way to work over the last couple of years. Some have decided to leave the workforce, many learned they need a better work-life balance. In turn, employees are rethinking how and where they want to work, what they want and what they are worth.”

“Construction has had a challenge filling positions for a long time, but the competition for workers may be even more intense than before,” Simonson says. “Now, historically low-paying industries, such as fast food, warehousing and local delivery, have dramatically increased starting pay and added signing and retention bonuses, along with other benefits. Many more sectors now offer flexible hours and the chance to work remotely or on a hybrid basis. These perks aren’t possible for onsite construction jobs, which means contractors will have to raise wages even more or find other inducements.”

“Construction is notoriously a boom/ bust industry, so every time we have another cycle we have a labor shortage,” Baker adds. “Every time we have a down cycle we have a labor surplus. The last time I could compare this to is the runup to the Great Recession in the mid 2000s. The difference was that the market was incredibly strong back then so the labor shortage made sense. When you have a labor shortage in a recessionary period, that is worrisome.”

Root Causes

There appear to be several root causes to the current shortage the industry is experiencing. Some may have accelerated during COVID, but for the most part these troubles were lurking for many years.

“This has been a long-term trend and was a concern within the industry well before COVID,” Ford-Smith notes. “Immigration laws need to be revisited and career paths need to be established so young people not interested in college can seek success in the construction industry.”

“The pool for plant labor, people willing do hard work and manual labor is just getting smaller and smaller,” Lien says, echoing concerns with immigration policy. “There are the politics of the southern border, and in general there are less people willing to do the kind of work we need.”

About the Author

Jim Schneider, LEED AP
Jim Schneider, LEED AP, has worked in the design and construction industry for almost 20 years. He writes about architecture, sustainability and construction from Denver.

Be the first to comment on "Strong Conditions in the Construction Economy Are Hampered by Labor Shortages"

Leave a Reply

%d bloggers like this: