Thanks to a strengthened economy, commercial construction and development is at near-record levels across the United States. In fact, as of the fourth quarter of 2016, the volume of jobs, projects and other key industry indicators are all reaching cyclical highs. The bad news: the labor shortage continues to threaten the seemingly-endless stream of commercial construction starts. According to a recent survey conducted by the Associated General Contractors of America, 69 percent of contractors have difficulty finding qualified craft workers to fill key spots.
Unemployment Falls, While Wages Rise
During the global financial crisis, many skilled construction workers left the industry due to lower construction rates, which has resulted in a labor pool that is 23 percent smaller today than it was in 2007. And this shortage doesn’t seem to be letting up anytime soon. The dwindling pool continued to drive down unemployment among U.S. construction workers to 7.4 percent in December 2016 from 7.5 percent in December 2015. At the same time, the average hourly wage for construction workers hit $30.22 per hour, more than 2.3 percent higher than in December 2015. The resulting fierce competition for talent has left contractors feeling the heat, with some projects facing costly delays.
Small Labor Pool Leads to Innovative Solutions
To overcome this skilled labor shortage, more and more contractors are adopting innovative strategies to win the battle for talent and complete projects with less manpower. While poaching laborers from competing construction sites remains rampant, some contractors are turning to online jobs platforms such as Hard Hat Hub and ConstructionJobs.com to recruit qualified construction talent.
While attracting skilled workers remains a top priority, firms are also turning to technology to fill gaps in their workforce. Computer modeling, GPS technology and drones that take photos of construction sites are among the tools that commercial builders are using to become more efficient and sidestep worker shortages.
Construction Labor Will Remain a Pain Point In 2017
Despite such measures, the U.S. construction labor pool is likely to remain squeezed in the near future. Data analyzed by JLL reveals that construction labor will still be a pain point for the industry at large through mid-year 2017. With skilled labor shortages remaining widespread, wages will rise consequently, which is sure to impact project timelines and budgets. Project sponsors should be streamlining project planning in order to book labor as early as possible to minimize delays.
By year-end 2017, business dynamics in the construction industry will transform as labor costs continue to rise, leading to the ongoing struggle to maintain sustainable profit margins. In addition, the potential for immigration reform under the new administration could have a negative impact on the labor supply, which is sure to spur wage increases even further.
Todd Burns is the President of the Project and Development Services for JLL. Todd has wide-ranging commercial real estate and construction experience, having held roles such as architect, owner, owners representative, general contractor and project manager.