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Seventy-nine percent of construction firms plan to expand their payrolls in 2019 but an almost equal percentage are worried about their ability to locate and hire qualified workers, according to survey results released Jan. 2 by the Associated General Contractors of America (AGC of America) and Sage Construction and Real Estate.

The findings are detailed in “Contractors Remain Confident About Demand, Worried About Labor Supply: The 2019 Construction Hiring and Business Outlook Report.

“Construction executives appear to remain confident about their market prospects for 2019 and plan to add headcount to cope with the added workload,” said Stephen E. Sandherr, the association’s CEO. “Even as they are optimistic about growing demand, contractors are concerned about finding qualified workers to execute projects.”

The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract for all 13 categories of projects included in the survey. For every segment, between 23 and 32 percent of respondents expect the dollar volume of projects they compete for to increase. Meanwhile, for all but one segment, between 11 and 16 percent of respondents foresee less work available in 2019. The difference between the positive and negative responses – the net reading – was between 10 and 17 percent for every category except multifamily.

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Public building construction scored the highest net positive reading of 17 percent. Three other segments had a 16 percent net positive: highway, K-12 school, and hospital construction. Projects for federal government agencies and retail/warehouse/lodging both had a net positive reading of 15 percent. Water and sewer and transportation facility construction had a net positive reading of 14 percent.

Four categories had a slightly less-positive net reading: private office construction (13 percent); manufacturing construction (12 percent); higher education construction (11 percent) and power construction (10 percent). The lowest net positive reading was for multifamily residential construction, at 5 percent. Association officials said this may indicate that multifamily construction has outpaced demand for now in some locations.

Most contractors plan to add staff in 2019 to keep pace with growing demand. Nearly four out of five (79 percent) plan to increase headcount this year, up from 75 percent at the start of 2018 and 73 percent at the start of 2017. However, just under half of firms report their expansion plans will only increase the size of their firm by 10 percent or less. About one-fifth of respondents plan to increase headcount by 11 to 25 percent. Only 7 percent of respondents plan to increase employment by more than 25 percent.

Despite firms’ plans to expand headcount, 78 percent report they are having a hard time filling salaried and hourly craft positions. That share was down slightly from 83 percent at the start of 2018. In addition, 42 percent expect it will continue to be hard to hire in the next 12 months and 26 percent expect that it will become harder to hire in 2019.

These labor shortages are having an impact on construction costs and project schedules, association officials noted. One-third of respondents report that staffing challenges drove costs higher than anticipated. In reaction, 37 percent of firms are putting higher prices into new bids and contracts. Similarly, 34 percent report projects have taken longer than they anticipated.

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Firms continue to raise pay and provide bonuses and benefits in response to labor shortages. Fifty-nine percent of firms report they increased base pay rates. Twenty-nine percent provided incentives and/or bonuses. Twenty-four percent of firms increased contributions or improved employee benefits to cope with workforce shortages.

Many firms are also investing more in training programs for current and new workers, association officials added. They noted that 63 percent of firms report they plan to increase investments in training and development in 2019, up from 52 percent at the beginning of last year. Large firms, in particular, are likely to do so, with 71 percent of companies with more than $500 million in revenue saying they plan to increase investments in training, compared with 59 percent of firms with $50 million or less in revenue.

Association officials noted that despite the headwinds of political partisanship and ongoing trade disputes, contractors are optimistic about demand for construction services in 2019. But they noted that the Outlook is based on responses that were provided before the recent partial federal government shutdown. And responses were provided at a time when President Trump had announced a halt to pending tariffs on a wide range of Chinese goods as negotiators seek to address trade concerns.

The Outlook was based on survey results from over 1,300 firms from 49 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans.

SOURCE – Associated General Contractors of America

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