Expecting Growth to Continue: AGC's 2018 Construction Hiring & Business Outlook

Written by  Stephen E. Sandherr

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Each year AGC of America surveys member firms on their expectations for labor and market conditions for the coming business year. We then closely analyze those survey results and prepare our annual Construction Hiring and Business Outlook. As we have done the past several years, we teamed up with Sage Construction and Real Estate to use these survey results as the basis for our annual industry forecast, which we call our Construction Hiring & Business Outlook.

Over 1,000 firms participated in our Outlook survey, representing a broad range of firms in terms of size, business volume and geographic distribution. Construction firms appear to be very optimistic about 2018 as they expect demand for all types of construction services to continue to expand. This optimism applies to both private- and public-sector construction demand, perhaps reflecting current economic conditions, an increasingly more business-friendly regulatory environment and expectations that the Trump administration will finally deliver on its promise to boost infrastructure investments.

Indeed, contractors expect demand for every segment of the construction market will grow in 2018. As measured by the net positive reading – the percentage of respondents who expect a market segment to expand vs. the percentage of respondents who expect a market segment to contract – respondents are very optimistic about the overall outlook, with a net positive reading of 44 percent nationwide and 49 percent in Texas.

When broken down by market segment, they are most optimistic about the private office market segment – 22 percent net positive, followed by other transportation and the retail; warehouse and lodging segment – both 21 percent net positive; water and sewer manufacturing with a 20 percent net positive; K-12 school construction with an 18 percent net positive reading and hospitality and highway construction, both with a 17 percent net positive reading.

Seventy-four percent of Texas contractors firms report they plan to add employees in 2018. Most of the hiring will only expand headcounts by a slight percentage per firm, however. Sixty-six of Texas firms report their expansion plans will only increase the size of their firm by 10 percent or less. Meanwhile, only 8 percent of firms in the Lone Star state report plans to expand their headcount by more than 25 percent above their current size. Only two percent of respondents in the state expect to reduce headcount.

Despite the overall optimist outlook, the construction industry faces a number of significant challenges this year. Top among those challenges are the growing workforce shortages that have made it difficult for the vast majority of firms to find and hire qualified workers. An overwhelming majority – 77 percent – of Texas firms expect it will either become harder, or remain difficult to recruit and hire qualified workers in 2018. In addition, 69 percent of Texas firms report they are currently having a hard time finding qualified workers to hire.

Firms continue to take a series of steps to address growing workforce shortages. Fifty-eight percent of Texas firms report they have increased base pay rates. Thirty-six percent have provided incentives and/or bonuses. And 22 percent of Texas firms have increased contributions and or improved employee benefits to cope with workforce shortages.

Even as they cope with worker shortages, firms continue to be worried about how decisions made in Washington and state capitols are impacting their operations. And despite strong demand, competition for workers poses a challenge to firms’ bottom lines.

It is also clear that contractors’ optimism is likely based on two key assumptions: that tax cuts will lead to stronger demand and that the Trump administration will finally deliver on its promise to boost investments in infrastructure. The best thing Washington officials can do to make sure that federal tax cuts deliver on their full potential is to continue the hard, time-consuming and tedious work of rolling back needless regulatory burdens. We remain committed to working with administration officials to help identify regulations that can be improved and others that can be removed.

The best thing Washington officials can do to make sure that federal tax cuts deliver on their full potential is to continue the hard, time-consuming and tedious work of rolling back needless regulatory burdens.

The administration must also deliver on its promise to boost investments in infrastructure. The association has already been working aggressively to push for new infrastructure investments and we will continue to take every opportunity to encourage the administration and Congress to enact new investments.

Congress and the Trump administration also need to take steps to address chronic workforce shortages. Among these is enacting a new Perkins Act that boosts funding and provides more flexibility for career and technical education. We will continue to lead the effort to encourage new federal, state and local measures to rebuild the pipeline for recruiting and preparing the next generation of construction professionals.

In other words, as long as federal officials continue to work to boost infrastructure investments, reduce regulations and support workforce development, 2018 will be a strong year for the construction industry.

Stephen E. Sandherr is the chief executive officer of the Associated General Contractors of America.



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