Home Builders Report Widespread Labor Shortages

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By Jewel Edwards

July 1 — U.S. home builders continue to experience widespread labor shortages among some construction crafts and report reduced availability of specialty subcontractors, according to results of a new survey released June 28 from the National Association of Home Builders.

Because single-family and multi-family housing have already increased by about 10 percent from their 2015 levels, the residential construction sector will need to locate more workers as the market continues to expand, Rob Dietz, NAHB senior vice president and chief economist, told Bloomberg BNA June 30.

Some industry observers and members, however, challenge whether there are really not enough construction workers to fill open positions, or if there are simply not enough attractive jobs available for the workers.

Data from the Labor Department's Job Openings and Labor Turnover Survey show that there are about three to four unemployed construction workers available for every job, Elise Gould, a labor market economist for the Economic Policy Institute, told Bloomberg BNA June 30.

“We've made great strides in recovery,” Gould said. “There are still more unemployed workers out there for every job opening. That's true across most sectors. If you look at something like construction, you still see that there are many multiples of unemployed construction workers for every job opening out there. It looks like there are a lot of construction workers lining up for every job.”

What Defines a Shortage?

Labor shortages are usually identified by data showing an increase in wages, and labor demand that exceeds the existing supply. However, that definition isn't always applicable for the construction industry, Peter Phillips, a labor economics professor at the University of Utah, told Bloomberg BNA July 1.

A construction labor shortage can also be identified when labor demand exceeds supply, whether wages are rising or not, Phillips said. This difference in definitions seems to be where some economists are at a crossroads.

May 2016 wage data from the Bureau of Labor Statistics show that the average earnings for construction workers in the private sector have increased about 2.5 percent over the last year. Associated General Contractors Chief Economist Ken Simonson told Bloomberg BNA June 30 that the wage data don't really show the “acceleration in wages that you might expect at a time of a labor shortage.”

Reports of rising wages alone, however, aren't the only indicator of “tightness in the labor market,” Simonson said.

One cause of a “depressed wage” could be the fact that contractors are having to hire workers who don't have a lot of experience in their craft, Simonson said. Nearly 50 percent or more of NAHB builders who responded to the association's survey reported shortages for carpenters, bricklayers, framers, painters, electricians and plumbers.

Simonson said AGC has been hearing constantly for several years that AGC member contractors, about 26,000 mostly commercial contractors, are having trouble finding workers who are qualified and experienced. “I think it's real. At first I was inclined to believe the aggregate data, but somehow the data is missing part of the story,” Simonson said. “Companies are spending longer looking for workers. They'd like to hire more workers. It's not just a matter of taking somebody who’s got a strong back or maybe a good work ethic who shows up on time.”

Gould said stories from construction contractors who are having difficulties finding workers are valid. Still, she wondered about what strides contractors have taken to bring more workers into the industry. Strategies could include raising wages or investing more job training. Gould said “the situation” could be potentially rectified “by making the job more appealing.”

Still in Recovery Mode

Dietz told Bloomberg BNA that residential data show that contractors are increasing wages. Data from the BLS Quarterly Census of Employment and Wages show that residential construction worker earnings increased about 5 percent from 2014 to 2015, and 19 percent from 2010 to 2015.

Dietz added that home builders have invested in training, but it's a “definitely a long-term mission.” Construction apprenticeship programs typically produce a skilled craft worker after four to five years of education, training and on-the-job experience.

The industry is really up against its history with the Great Recession, when about 2 million construction workers left the industry, Dietz said. About 1 million of those workers have not returned to the industry, and the older construction workers are entering retirement.

Big Jobs Not Helping Supply

Stephen Lindauer, chief executive officer of The Association of Union Constructors, told Bloomberg BNA June 30 that labor shortages are definitely a “regional thing,” adding that some areas of the industry are struggling more than others.

“Do we not have enough jobs, or don't we have enough people,” Lindauer said. “The case is both.”

When it comes to job opportunities, Lindauer said some sectors aren't providing the same openings for construction workers that they have in the past. “Steel is down,” he said. “Utility? Forget it. Coal fired power generation is going to continue to decline. Refining? Not much going on there because of the price of oil.”

Mega-construction projects, many in the energy sector, that boast promises of creating thousands of construction jobs over several years could also create labor shortages, Lindauer said. Specifically, Lindauer referenced Royal Dutch Shell's announcement that the company will build a multibillion-dollar ethane cracker plant in western Pennsylvania, that is expected to create 6,000 construction jobs.

“Everyone's nervous,” based on what he's heard, Lindauer said. “Because they're going to need all those trades and they are not there.” He said many of the workers might travel in from other areas, which would lower the labor supply in cities not located near the plant.

“Those big mega-projects are very welcome,” Lindauer said. He said he's concerned about “the maintenance activities that we've done for decades up there. How do we continue to service our customers if everyone is running to that job?”

To contact the reporter on this story: Jewel Edwards in Washington at jedwards@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

Text of the NAHB Housing Market Index survey results are available at http://src.bna.com/gsA.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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