Despite signs of a slowing economy, most US construction firms expect demand for their services and hiring will expand in 2020, yet even more firms are worried about their ability to find qualified workers to hire, according to survey results released by the Associated General Contractors of America and Sage Construction and Real Estate.
Stephen E. Sandherr, AGC
“Contractors are very optimistic about demand for construction in 2020,” said Stephen E. Sandherr, the association’s chief executive officer. “At the same time, many construction executives are troubled by labor shortages and the impacts those shortages are having on operations, training and safety programs, and bottom lines.”
The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract for all 13 categories of projects included in the survey.
For every segment, between 27% and 36% of respondents expect an increase compared to 2019 in the dollar value of projects they compete for. Meanwhile, between 11% and 21% of respondents foresee less work available in 2020. The difference between the positive and negative responses – the net reading – was between 8% and 25% for every category.
Water and sewer construction scored the highest net positive reading of 25%. Four other segments had a 20% net positive: bridge & highway, K-12 school, hospital construction, and transportation (transit, rail & airport). Power projects and federal construction projects had a net positive reading of 17%. Higher education construction had a net positive reading of 16%.
Five categories had slightly less positive net readings: multifamily residential construction (11%); manufacturing construction (11%); public building construction (10%); retail, warehouse & lodging construction (10%).
Overall, respondents were more optimistic than a year ago regarding institutional and most public categories but less optimistic about private-sector nonresidential segments.
Most contractors plan to add staff in 2020 to keep pace with growing demand. A full 75% of firms plan to increase headcount this year. However, just over half of firms (52%) report their expansion plans will only increase the size of their firm by 10% or less.
Despite firms’ plans to expand headcount, 81% report they are having a hard time filling salaried and hourly craft positions. That share is up slightly from 78% at the start of 2019. In addition, 43% expect it will continue to be hard to hire in the next 12 months and 22% expect that it will become harder to hire in 2020.
Labour shortages are having an impact on construction costs and project schedules, association officials noted. A total of 44% of respondents report that staffing challenges drove costs higher than anticipated. In reaction, 41% of firms are putting higher prices into new bids and contracts. Similarly, 40% report projects have taken longer than they anticipated and 23% report putting longer completion times into their bids or contracts.
Firms continue to raise pay and provide bonuses and benefits in response to labour shortages, with 54% of firms reporting that they increased base pay rates more in 2019 than in 2018 while 23% provided incentives and/or bonuses.
Construction firms are also investing more in training programs for current and new workers, association officials added. Two out of five of firms report they revamped initiatives to recruit labour last year.
“Firms are adopting a variety of approaches to replace workers or allow for use of workers with less experience or training than before,” said Ken Simonson, the association’s chief economist. He noted that 32% of respondents report their firms are investing in labour-saving equipment, including drones, robots and 3-D printers, while 28% of respondents are using methods to reduce onsite worktime, including lean construction, building information modeling or offsite pre-fabrication.
Officials with Sage noted that nearly half (46%) of respondents will increase their information technology (IT) investments in 2020. The largest share of firms (30%) plan to increase their investments in project management software. About a quarter of firms will increase their investments in document management software (25%) and fleet tracking/management software (23%).
The Outlook was based on survey results from nearly 1,000 firms from 48 states. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans. Click here for Strong Demand for Work Amid Stronger Demand for Workers: The 2020 Construction Hiring and Business Outlook Report. Click here for the survey results.