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Report Questions Builders' Labor Worries

Tuesday, April 26, 2016

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Construction industry groups have incessantly sounded alarms that the biggest challenge facing the recovering housing market is a lack of skilled labor; however, a new report seems to question those calls.

The Goldman Sachs Group said in its April 17 “The Mortgage Trader” report that the construction sector has seen a 5 percent increase in job growth over the past year—"the strongest performance among all industries."

© / PhotoInc

Goldman Sachs says data does not support the existence of labor shortages; industry groups argue that it does.

At the same time, the report stated that wage growth in the sector has been in line with the national average.

An analysis of payroll growth and wage inflation data prompted Goldman Sachs to “suggest that labor shortages may not be to blame for mediocre level of housing activity.”

Analysis: Labor Shortage Doesn’t Exist

“Economics 101 would suggest that, if labor shortages did in fact exist, upward pressure on wages would be more pronounced and payroll growth would be anemic,” according to the report.

“Therefore, the evidence from the industry-level employment and wage data does not support the existence of labor shortages.”

Instead, Goldman Sachs says other factors, such as delays in the permit issuing process and land scarcity, may be the culprits behind lingering growth challenges.

Groups See Shortages

In response to the report, the Associated General Contractors of America and the National Association of Home Builders maintain that the nation’s labor crunch is real.

“Seventy percent of our members tell us they are having a hard time finding qualified workers to fill positions,” said Brian Turmail, AGC senior executive director of public affairs.  

© / © Brian Hudson

Land scarcity and delays in the permit issuing process may be hindering new building, according to Goldman Sachs analysts.

“We have looked at the same data and asked ourselves the same questions, but we suspect some of the data on pay may be lagging a tad, especially considering reports we are getting from places like Orlando where contractors are having to pay signing bonuses to get people on board and places like Nashville where workers leave on their lunch break and don’t return because they have been hired by the contractor building a structure on the other side of the street.”

The AGC has long warned that even as firms continue to hire, the more the economy expands and demand grows, the more severe labor shortages will become, Turmail said.

The NAHB indicates that labor was a top challenge in 2015 and projects it to remain so in 2016.

NAHB Chief Economist Robert D. Dietz says Bureau of Labor Statistics data point to “a rising number of unfilled positions in the construction industry which is an indication that despite job gains, which there have been, the amount of unfilled jobs is rising.”


Tagged categories: Construction; Economy; Good Technical Practice; Government; Housing; Jobs; Market; North America; Trends; Workers

Comment from Phil Kabza, (4/26/2016, 7:46 AM)

You get what you pay for. Undertake suppression of the unions who traditionally provided trade education; vote down tax and bond increases to support vocational education at the high school and community college level; beat down subcontractor rates that support the higher wages mature skilled workers need to support families; support politicians who demonize immigrant laborers in order to get elected - then complain that you cannot find skilled workers? Is this hard to figure out?

Comment from Jesse Melton, (4/26/2016, 8:23 AM)

Any time a financial institution cites "Economics 101" or other basic premises of textbook market behavior you can sleep comfortably knowing they're full of crap. Those firms exist solely because the stuff taught in middle school is so oversimplified it's functionally fiction. Saying "Economics 101 would suggest (X)" is like saying a building foundation is "just concrete" or the architectural plans "are just a bunch of drawings". If the world functioned like Economics 101 would suggest then there'd be no need for Congressional hearings where finance executives explain where all the money went.

Comment from Monica Chauviere, (4/26/2016, 9:47 AM)

Was so put off by this article that I came down here to complain and saw the other two as well. So I'm not the only one, huh? So very aptly said by Phil and Jesse. My additional comment also has to do with the lack of mental capacity of the author. Would be interesting to know the age of the author. The industry complaint is the lack of SKILLED labor, not warm bodies. But of course everyone knows those guys walking around building sites are just a bunch of monkeys. Anyone can be shown how to nail two board together, right?

Comment from Charles Brown, (4/26/2016, 11:00 AM)

Data does not suggest that Goldman Sachs knows WTH they are talking about.

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