A recent survey of 1,300 U.S. construction firms by the Associated General Contractors of America and Sage Construction and Real Estate found that 73 percent of construction firms plan to expand their payrolls in 2017 as contractors expect private and public sector demand to grow in all markets.
But despite the general optimism, many firms said they remain worried about the availability of qualified workers, and rising health and regulatory costs, according to the report, titled “Expecting a Post-Election Bump: The 2017 Construction Industry Hiring and Business Outlook.”
“Contractors have relatively high expectations for 2017 as they predict the economy and demands for all types of construction will grow,” said Stephen Sandherr, CEO of the Associated General Contractors of America. “As a result of this optimism, many firms expect to expand their headcount next year.”
Forty-six percent of respondents said they expect a higher dollar volume of projects in 2017 compared to last year. Nine percent expect a lower volume and the remaining 45 percent expect volumes to remain more or less constant.
Contractors had a positive outlook for 13 market segments, such as hospital and retail, warehouse and lodging, private office, manufacturing, highway, public building construction, higher education construction, K-12 school construction, and water and sewer construction. Contractors were less optimistic this year for the multifamily residential sector, the association said.
Sixty-six percent of construction firms reported their planned hiring will increase total headcount between 1 and 25 percent, according to the survey, but AGC officials said the slight increases in headcount may be a result of the difficulty of finding enough qualified workers.
Seventy-six percent of respondents predict that labor conditions will remain tight — or get worse — during the next 12 months. To help retain or recruit qualified staff to deal with worker shortages, many firms reported they are increasing pay or benefits, according to the survey.
“Contractors remain quite concerned about labor shortages, tight margins and growing costs,” said Ken Simonson, the association’s chief economist. “In particular, as additional older workers reach retirement age, firms will struggle to find qualified workers to replace them.”
In addition to the qualified worker shortage, contractors are concerned about the continued increase in health care and regulatory compliance costs. Eighty-four percent of firms report the cost of providing health care for their employees increased in 2016, with 82 percent expecting their health care costs will increase this year too. Forty-one percent of firms report they’re worried about growth in federal regulations, according to the survey.
Contractors are also more concerned about developing an IT plan to protect their data against cyberattacks. According to the report, 35 percent of firms have invested at least 1 percent of their revenue in information technology last year, with 40 percent planning to increase those investments in 2017. Seventy-seven percent of respondents said they currently have an IT plan in place to prevent hacking.
“With competition heating up for both projects and qualified staff, construction companies are relooking at how technology can help them meet those challenges head on,” said Jon Witty, vice president and general manager at Sage Construction and Real Estate. “Contractors are not only increasing their investment in IT, they are becoming more strategic about securely applying information technology to all aspects of their business.”
A new administration
Association officials said that overall economic conditions indicate 2017 should be a positive year for construction, but acknowledged that the survey responses are based as much in high expectations for the new administration and President Donald Trump’s commitment to investing in infrastructure, improving federal health care laws and reducing regulatory burdens.
“While the new administration and its stated policy objectives offer many reasons for optimism, there is a significant risk to the industry if the new Congress and administration under deliver,” Sandherr said. “If plans to invest in infrastructure, reform health care laws and roll back regulations are delayed, many contractors will likely scale back their plans to expand headcounts.
Sandherr said the association has already crafted two plans to help guide the administration and Congress and ensure they act quickly to deliver on election promises. The association’s Agenda to Rebuild Infrastructure and the Construction Workforce outlines a series of steps federal officials should take to fund new infrastructure investments and accelerate federal reviews. The second plan identifies regulations and executive orders that the new administration should cancel, improve or reconsider.
“Together these two plans offer a clear roadmap for the administration and new Congress to help deliver on the promise of this year’s relatively positive construction outlook,” Sandherr said. “As long as the new administration follows through on its commitments, construction firms will see more demand for their services and, potentially, slightly better profit margins.”