Construction Companies Face Labor Shortage Amidst Strong Demand

The construction industry is currently grappling with a tight labor market, leading to an increase in efforts by construction companies to attract more workers. Despite the rising pay levels and a relatively low unemployment rate, the shortage of qualified workers remains a significant challenge for the industry.

Demand for Construction Employees Persists

Outside of the homebuilding sector, there continues to be a high demand for construction employees. According to Ken Simonson, the chief economist of the Associated General Contractors of America (AGC), contractors are consistently reporting that finding qualified workers is their primary challenge, surpassing project availability and even material sourcing.

Steady Job Growth and Sector-Specific Insights

In May, the construction sector experienced a notable gain of 25,000 jobs, indicating a steady growth. Over the past year, the industry has also added 192,000 positions, signifying a 2.5% rise. Nonresidential construction firms accounted for the majority of employment growth, with an addition of 22,100 workers. This includes nonresidential building and specialist trade contractors, as well as heavy and civil engineering construction organizations. However, residential construction and specialty trade contractors only witnessed a marginal increase of 2,500 workers.

Low Unemployment Rate among Construction Workers

The unemployment rate among construction workers dropped from 3.8% in May 2022 to 3.5% in May 2023. This represents the second lowest May rate in the 23-year history of available data. The decline in unemployment indicates the high demand for construction workers and the limited availability of qualified individuals.

Increasing Wages to Attract Workers

To attract talent amidst the labor shortage, construction firms have been raising salaries. The average hourly wage for production and nonsupervisory workers in the construction industry increased by 6% compared to the previous year, reaching $34.07 per hour. Construction companies are offering a salary “premium” of over 19% above the mean hourly pay for all production workers in the private sector, demonstrating their commitment to attracting and retaining skilled workers.

Barriers Created by the Federal Government

Representatives of the AGC acknowledge that businesses are actively increasing compensation and employing other strategies to entice workers. However, they highlight the federal government’s counter productive approach. The government invests significantly more in promoting college degrees and careers in the service industry, while neglecting career development and investment in the construction workforce. This discrepancy creates a barrier to the growth and development of the construction industry.

The construction industry faces a challenging labor shortage despite the robust demand for new construction projects. Construction companies are responding by raising wages and adopting various measures to attract more workers. While job growth remains steady, finding qualified workers continues to be the primary hurdle for contractors. The federal government’s lack of support for career development in the construction sector further exacerbates the labor shortage issue.