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Recovery, Challenges Ahead in Construction

Monday, January 11, 2016

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Hiring, market demand, worker shortages healthcare, IT, regulations, are among the topics that are top-of-mind for those in the construction industry at the start of 2016, according to a survey released this week.

The report boasts optimism as nearly three-quarters of American construction firms plan to add workers in 2016. The Associated General Contractors of America (AGC) and Sage Construction and Real Estate said in a survey released Wednesday (Jan. 6) that 71 percent of contractors expect to expand their payrolls in 2016 thanks to growth in public and private markets. Kansas leads the market in hiring optimism, the statement said.

However, the downside of the news is a projection of worker shortages, regulatory burdens and IT security, according to AGC and Sage.

The figures were among the results in the joint survey, The Challenges Facing a Growing Industry: The 2016 Construction Industry Hiring and Business Outlook.

istock/Yury Gubin
©iStock.com / Yury Gubin

A recent survey by AGC and Sage Construction and Real Estate shows that 71 percent of construction firms plan to add workers in 2016, but concernss still plague he industry.

“The construction industry will continue to recover in 2016 as many firms add to their headcount amid growing demand in a range of private and public sector markets,” said Stephen E. Sandherr, AGC’s chief executive officer.

“The industry also faces a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery.”

Hiring Ups, Downs

An increase in hiring also comes with mixed numbers depending on the size of the firms. AGC said that of the 71 firms that plan to hire this year, 63 percent said they plan to employ only between 1 and 25 new workers, while 8 percent said they will expand their headcount by 25 percent or greater.

The increase also appears to be state-dependent, the survey showed. Among the 30 states that had a large enough survey size to be sampled, Kansas led the states with 95 percent of its firms planning on increasing its payroll.

Meanwhile the news is not as rosy in Pennsylvania, where 25 percent of its firms plan to decrease the number of workers they employ. The Keystone State led the pack with the largest decrease of construction workers in the nation.

A complete list of the state-by-state survey can be found here.

Market Variances

Contributing to the overall demand, or decrease in demand, is a mix of private and public market sectors, the survey noted. Respondents measured in the net positive reading of the survey said they were more optimistic about the outlook for retail, warehouse and lodging, with a 21 percent net positive response.

Hospitals—at 19 percent net positive results—came in second, followed by private offices, multi-family residential, higher education and construction. Schools with grades K-12 also came in at 12 percent, as did public buildings. The survey noted that those numbers were in direct contrast to a similar survey in 2015.

©iStock.com / kadmy

While retail, wharehouse and lodging construction projects are expected to have the biggest increases, government projects are expected to have the lowest, the survey found.

However, contractors were less positive about other segments, including manufacturing (7 percent net positive), other transportation (3 percent), power (1 percent) and direct federal construction (-1 percent). AGC notes that the survey was completed prior to increased funding for federal highway, transit and agency spending, so those numbers might be lower than the actual optimism for 2016 federal construction.

Shortages Continue

To offset the projected worker shortages, firms are increasing pay and benefits for their workers with 49 percent of respondents stating that they have raised their base pay rates. Additionally, 30 percent of construction employers who took part in the survey said they were raising incentives or bonuses to attract workers, while 23 percent said they have increased their contributions to employee benefit programs.

Nearly 50 percent of firms also said they plan to increase training opportunities in 2016, AGC and Sage reported.

Still, 69 percent of respondents said that the expect labor conditions will remain tight or get worse this year and 70 percent said they are having difficulties finding salaried or craft professionals.

“What is particularly striking about the findings on worker shortages is that they are consistent with the responses from last year’s outlook,” said Ken Simonson, AGC’s chief economist.

“In other words, after a year of raising pay and increasing benefits, contractors remain as worried about the lack of qualified workers as they were at the beginning of 2015.”

Healthcare, IT, Regulations

Other concerns facing contractors in 2016 include rising healthcare costs; investments in information technology; and regulatory burdens, according to Sage.

©iStock.com / Pamela Moore

Other concerns facing contractors in 2016 include rising healthcare costs; investments in information technology; and regulatory burdens, according to Sage.

As technology and the threat of cybercrime become more prevalent, many firms report they are taking steps to protect their IT systems. For example, 75 percent of firms said they have an overall IT security plan and 46 percent have a security policy in place for mobile devices, Sage reported.

“Technology is making it easier for firms to operate and succeed in today’s competitive marketplace,” said Jon Witty, vice president and general manager for Sage Construction and Real Estate, North America.

“We are seeing continued growth in the adoption of mobile technology and collaboration software and a continued move to the cloud, all done with an increasing focus on security,” said Witty.

As for regulatory concerns, 39 percent of contractors said they are worried that federal regulation expansion while 34 percent believe state and local regulations will cause them to cut through more red tape.

Industry Optimism

But AGC remains positive that the nation will continue to support its construction industry.

“As long as local, state and federal officials are willing to act on our workforce measures, embrace a more rational approach to regulations, identify measures for controlling healthcare costs and protect e-commerce, the industry should continue to expand,” Sandherr said. “That is precisely why we will continue to focus our energies on ensuring the continued growth of this industry.”

The 2016 Outlook was based on survey results from more than 1,500 construction firms from all 50 states and the District of Columbia. Contractors of every size answered more than 30 questions, but the numbers varied on the responses themselves, AGC and Sage reported.

   

Tagged categories: Associated General Contractors (AGC); Business conditions; Business matters; Business operations; Commercial Construction; Construction; Government; Government contracts; Regulations; Roads/Highways; Technology; Workers

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