CONSTRUCTION WORKERS

In our last blog we spoke of employment and recovery in jobs since the recession ended. One of the problems felt in the growing labor market is that there are not enough construction workers. In USA Today – The Journal News on August 27, 2015, Paul Davidson wrote an article entitled ”As construction heats up, so does worker shortage”. “Labor squeeze is delaying projects curtailing economy”. Construction of homes and commercial buildings are up significantly this year and the industry would be sizzling but for a critical shortage of construction workers. The shortage of labor is delaying projects, raising home prices and forcing companies to turn down work. Spot labor shortage began in 2012 as new construction came back to life following the 2000’s real estate crash.
The CEO of The National Association of Home Builders, Jerry Howard called the shortage an epidemic. Nearly 70% of home builders surveyed in June, 2015 reported a shortage of carpenters up from 63% in 2014. 86% of commercial builders said they are having trouble filling hourly or salaried position up from 83% in 2014. One of the reasons given is that many construction workers left the industry during the recession to become truck drivers, factory workers or “rough necks” in the then booming oil industry. Most of these workers are not returning to the construction industry.
Housing starts have increased 11.3% this year as compared to 2014 to a post-recession high. Commercial construction spending rose 9.7% during the first half of 2015. Meanwhile, the pipeline of new workers has thinned over the recession years. Many high schools have phased out shop classes and parents have steered graduates to a four year college and white collar jobs. The Home Builders Institute which does training and local home builder groups recently rolled out more instruction programs but it takes 12 – 18 months for a new recruit to become a productive worker.
The shortage according to the article has pushed up labor costs. Average hourly earnings for construction workers were up 2.6% in July compared to 2.1% for all U.S. workers, according to the Labor Department. Pay hikes are significantly higher for in-demand specialists such as plumbers and electricians in the South and other bustling areas. This is turn has helped drive up new home prices 5.7% on an annual basis. Over the past 12 months, according to Home Builders Group, the work shortage has also crimped new home inventories for move up buyers causing a domino effect that has curtailed supplies of existing home for the first time buyers and the limited housing supplies have raised prices. The owner of Conine Residential Group in Dallas Texas, Kent Conine says his single family homes take typically six months to build are being delayed about two months because of worker shortages. Competition for workers are so intense that rivals routinely poach his workers by offering small pay increases. Conine who expects to build 25 homes this year says would complete about 35 if enough workers were available. He says his labor costs and home prices have increased 20% over this past year.
Commercial contractor John Finch, co-owner of PBG Builders in Nashville says he is hiring fewer skilled workers and more supervisors to oversee them and this has increased his labor costs about 10% over the past year. Finch who builds throughout the Southeast and Mid-Atlantic region could increase his income by 50% if he had enough skilled workers.