People have become increasingly scarce in 2018 as the construction labor market tightens. Even organizations that do have enough people suffer losses and slowdowns the minute one worker can’t perform, and the second a manufacturer braves a small setback. With tariffs on trade, material costs are increasing with inflation and projected to continue to rise another 3% next year. It’s been a rough cycle with these pain points feeding into one another. However, despite some trends that prove challenging, construction projects remain steady heading into the new year, and economists are optimistic that things look good for the industry as a whole.
Throughout 2018 there continued to be steady improvements in the following areas that we feel are a clear indication of an industry, and nation, that remains on the up-and-up:
1. State growth in construction jobs is on the rise for 3/4th’s of the nation.
2. More women in construction-related roles and executive roles within the industry. Read more about women in construction >>
3. Improvements on environmental impact and sustainability efforts.
4. Increases in technology and integration, as well as consistency in usage across the construction industry.
5. Consumer and business confidence are elevated, with small businesses poised for expansion using the new tax laws and reduced regulations as incentive.
6. Wage growth is at its best level in nearly 10 years.
These trends are projected to continue, and, although some indirectly impact the construction industry, they all stand to eliminate some of the mounting stress that permeates today’s news casting doubt on growth in infrastructure. Consumer optimism and small business optimism almost always bodes well for the economy, which then transfers to the construction industry. The new tax laws and reduced regulations means that states have more money, increasing infrastructure spending and prompting wage growth. Wage increases for workers coupled with the integration of new technology makes sites safer and more efficient. Therefore, all things considered, 2018 was a success.
We’re on-par for another repeat of 2018, unless something major happens such as a natural disaster or the passing of an infrastructure bill. Inflation will likely be a 2020 problem – so we can put that out of our minds for now. In the meantime, lets be happy that 2018 didn’t bring about an industry recession as some anticipated and the likelihood that 2019 won’t either, which means nine years of consecutive growth in total spending at 2019 year’s end.
According to AIA’s projections, we’ll see little fluctuation in overall non-residential building – down just 0.7% from last year’s 4.7% growth, as well as a dead even split from 2018 through 2019 in institutional building as seen below. Within institutional building, the education sector in 2019 will see 1.2% growth over last year, and healthcare facilities will stay much the same at only a 0.3%
As for commercial building, every sector within it is poised for growth in 2019 – it just so happens that everything aside from industrial is projected at a lower percentage increase than it was in 2018. But, that is still good.. and the fact that industrial building is supposed to climb 4.8%, as seen below, indicates some clear progress in building adaptation and a very real need to renegotiate trade, which we so desperately need.
If the U.S. gets a trade deal completed, we could see one of our worries for the industry wash away. But, that still leaves a big problem: baby boomers are retiring in larger numbers and our youth seems disengaged in the trades. Add that to the fact that we have more job openings than we do unemployed people, and you will quickly recognize that the opportunity for people looking for work is high; therefore, the onus is on us to appeal to younger generations in new, creative ways. With more work and fewer resources, construction firms need to invest in technology firms to attract a new generation of labor. And yet, that still isn’t enough.
Real change begins with ourselves, and the stark reality is, as our Mid-Atlantic Senior Managing Consultant Tom Dunn, states that, “At its core, the labor shortage in the construction industry is a cultural and generational issue. There are more than 75 million millennials in the U.S. so the human capital is there, but they were guided by Baby-Boomer or Gen-X parents towards four-year colleges and white-collar careers as the path to success. On top of that, only about 10% of the construction workforce are women which is not leveraging more than half of the population, and in 2008-2009 many left the construction industry during the Great Recession to find work and never came back. It is going to take a collective effort sparked from within the industry over decades to shift this paradigm. Construction leaders need to buy-in to the adoption of new technologies, support local trade schools, and sponsor early education programs; all to build trust and opportunity with the next generation of labor.” He explains, “Given the demographics, the existing talent pool is not something the industry can rely on much longer to fill the vacancies. The future talent pool is between the ages of 5 – 15, and as they move forward into high school they need to be appealed to, cultivated, and mentored.”
We understand that this will take time, but are hopeful it will be a major trend in 2019. Being heavily involved in the construction industry as search consultants, Helbling will continue to monitor this forecast in the coming months. Should your organization wish to discuss market intelligence, we are always available. We hope 2018 was a good year for you, and we look forward to catching up with you in the new year.