Many
firms plan to start hiring again and most contractors predict demand will
either grow or remain stable in virtually every market segment this year
according to survey results released by the Associated GeneralContractors of America. The survey, conducted as part of Optimism Returns: The
2014 Construction Industry Hiring and Business Outlook, provides a generally
upbeat outlook for the year even as firms worry about growing worker shortages,
rising costs and the impact of new regulations and federal budget cutting.
“Contractors
are more optimistic about 2014 than they have been in a long time,” said
Stephen E. Sandherr, the association's CEO. “While the
industry has a long way to go before it returns to the employment and activity
levels it experienced in the middle of the last decade, conditions are heading
in the right direction.”
Sandherr
noted that many firms plan to begin hiring again, while relatively few plan to
start making layoffs. Forty-one percent of firms that did not change staff
levels last year report they plan to start expanding payrolls in 2014, while
only 2 percent plan to start making layoffs. However, net hiring is likely to
be relatively modest, with 86 percent of firms reporting they plan to hire 25
or fewer new employees this year.
Among
the 19 states with large enough survey sample sizes, 100 percent of firms that
did not change staffing levels last year in Utah plan to start hiring new staff
this year, more than in any other state. (Click here for state-by-state
survey results.)
Contractors
have a relatively positive outlook for virtually all 11 market segments covered
in the Outlook, in particular for private-sector segments. For five of those
segments, at least 40 percent of respondents expect the market to expand and
fewer than 20 percent expect the market to decline in 2014. The difference
between the optimists and pessimists – the net positive reading – is a strong
28 percent for private office, manufacturing and the combined
retail/warehouse/lodging segments, and 25 percent for power and hospital/higher
education construction.
Among
public sector segments, contractors are more optimistic about demand for new
water and sewer construction, with a net positive of 17 percent. Contractors
are mildly optimistic about the market for highway construction, with a net
positive of 10 percent. Respondents are almost equally divided regarding the
outlook for the other four segments, ranging from net positives of 5 percent for
public buildings, 4 percent for schools, 3 percent for transportation
facilities other than highways, to a negative of 2 percent for marine
construction.
Sandherr
added that contractors’ market expectations are significantly more optimistic
than they were at this time last year. At that time, more contractors expected
demand for highway, other transportation, public building, retail, warehouse
and lodging, K-12 schools and private officers to shrink than expected it to
grow.
Many
contractors also report they plan to add new construction equipment in 2014.
Seventy-three percent of firms plans to purchase construction equipment and 86
percent report they plan to lease it this year. The scope of those investments
is likely to be somewhat limited, however. Forty-four percent of firms say they
will invest $250,000 or less in equipment purchases and 53 percent say they
will invest that amount or less for new equipment leases.
One
reason firms may be more optimistic, association officials noted, is that
credit conditions appear to have improved. Only 9 percent of firms report
having a harder time getting bank loans, down from 13 percent in last year’s
survey. And only 32 percent report customers’ projects were delayed or canceled
because of tight credit conditions, compared with 40 percent a year ago.
“While
the outlook is significantly more optimistic than in years past, there are
still areas of concern for most contractors,” said Ken Simonson, the
association's chief economist. “Many firms will struggle to find enough skilled
workers, cope with escalating materials and health care costs, and comply with
expanding regulatory burdens.”
Ninety
percent of construction firms report they expect prices for key construction
materials to increase in 2014. Most, however, expect those increases will be
relatively modest, with 43 percent reporting they expect the increases to range
between 1 and 5 percent. Meanwhile, 82 percent of firms report they expect the
cost of providing health care insurance for their employees will increase in
2014. Despite that, only 1 percent of firms report they plan to reduce the
amount of health care coverage they provide.
Simonson
noted that as firms continue to slowly expand their payrolls, they were likely
to have a harder time finding enough skilled construction workers. Already, 62
percent of responding firms report having a difficult time filling key
professional and craft worker positions. And two-thirds of firms expect it will
either become harder or remain as difficult to fill professional positions and
74 percent say it will get harder, or remain as hard, to fill craft worker
positions.
Those
worker shortages are already having an impact, the economist added. Fifty-two
percent of firms report they are losing construction professionals to other
firms or industries and 55 percent report they are losing craft workers. As a
result, a majority of firms report they have improved pay and benefits to help
retain qualified staff. One reason they are likely worried is that nearly half
of the firms believe training programs for new craft workers are poor or below
average.
Adding
to their challenges, 51 percent of contractors report that demand for their
services is being negatively impacted by federal funding cuts, new federal
regulations and/or Washington’s inability to set an annual budget. “It would
appear that Washington is not here to help as far as contractors are
concerned,” Simonson noted.
Association
officials added that survey respondents would prefer that Washington officials
work on other priorities. Seventy-seven percent of firms reported listed having
Washington find ways to make it easier to prepare the next generation of
skilled workers as a top priority. Sixty-three percent listed repealing all or
part of the Affordable Care Act as a top priority. And 63 listed renewing tax
deductions and bonus depreciation for construction equipment as a top priority.
