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2014 Forecast: Brisk, with Jobs Likely

Friday, January 24, 2014

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Many construction contractors plan to start hiring again, and most are predicting stability or growth in virtually every major market segment this year, a new survey shows.

Investment in construction equipment is also expected to rise as activity ramps up in both the commercial and public-works realms, according to a survey of more than 800 U.S. construction firms by the Associated General Contractors of America.

That's the good news.

Office construction
© iStock / JacobH

Contractors are expecting a strong year in private office construction, AGC says.

The other news: Contractors remain worried about finding qualified workers; about health-care costs; about the rising cost of materials; and about some impending federal regulations related to record-keeping, silica and wetlands.

'The Right Direction'

Nevertheless, contractors "are more optimistic about 2014 than they have been in a long time,” said Stephen E. Sandherr, AGC's chief executive officer, said in a press release that accompanied the national survey results.

“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.”

The survey, conducted as part of Optimism Returns: The 2014 Construction Hiring and Business Outlook Report, 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.

More Hiring, More Activity

According to the survey, 41 percent of firms with flat staff levels in 2013 say they plan to expand payrolls in 2014, while two percent plan to start making layoffs. Net hiring is likely to be relatively modest, with 86 percent of firms reporting plans to hire 25 or fewer new employees this year.

Construction Outlook
AGC

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, the survey showed. (State-by-state survey results are available here.)

The survey looks at 11 market segments:

  • Highway
  • Hospital/Higher Education;
  • K-12 School;
  • Manfacturing;
  • Marine Construction;
  • Other Transportation;
  • Power;
  • Private Office;
  • Public Building;
  • Retail, Warehouse, Lodging; and
  • Water/Sewer.

Optimists and Pessimists

Contractors have a relatively positive outlook for virtually all 11 market segments covered, especially in the private sector, the survey shows.

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, AGC said.

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.

Public Sector: Water, Sewer Activity

Among public-sector segments, contractors are more optimistic about demand for new water and sewer construction, with a net positive of 17 percent, AGC reported. Contractors are mildly optimistic about the market for highway construction, with a net positive of 10 percent.

Water Tank
© iStock / Adventure_Photo

In the public sector, water and sewer construction should be a bright spot.

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 non-highway transportation facilities, to a negative of 2 percent for marine construction.

That's a better game face than contractors wore this time last year, Sandherr notes. At that time, more contractors expected demand for highway, other transportation, public building, retail, warehouse and lodging, K-12 schools and private offices all to shrink than expected them to grow.

Gearing Up

Many contractors also report they plan to add new construction equipment in 2014: 73 percent of firms say they plan to buy and 86 percent to lease.

Forty-four percent of firms say they will invest $250,000 or less in equipment purchases; 53 percent say they will invest that amount or less for new equipment leases.

Easing credit conditions appear to be buoying contractors as well. 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, the survey showed.

On the Other Hand...

Staffing, material and insurance costs, and regulatory challenges remain, however, said Ken Simonson, the association's chief economist.

Nine in 10 firms expect prices for key construction materials to increase in 2014. Most, however, expect those increases will be relatively modest.

SurveyAGC
AGC

And while 82 percent of firms expect their health-care costs to grow, only 1 percent plan to reduce the amount of health-care coverage they provide employees.

Finding Help

Meanwhile, employers continue to fret about finding qualified employees. Already, 62 percent of responding firms report difficulty filling key professional and craft worker positions. Two-thirds of firms say they expect that challenge to continue, or grow; 74 percent say it will remain hard, or get even harder, to fill craft worker positions.

More than half of firms report losing construction professionals to other firms or industries; 55 percent say they are losing craft workers. (And nearly half are critical of the training programs for new craft workers.)

EmploymentSurvey
AGC

The shortage has been good news for employees and job seekers, however: A majority of firms say they have improved pay and benefits to help retain qualified staff.

Uncle Sam's Impact

Adding to their challenges, 51 percent of contractors say that federal funding cuts, new or proposed regulations, and/or Washington's inability to set an annual budget have are all having a negative impact on their business.

AGC says survey respondents "would prefer that Washington officials work on other priorities," such as:

  • Having Washington find ways to make it easier to prepare the next generation of skilled workers (77 percent);
  • Repealing all or part of the Affordable Care Act (63 percent); and
  • Renewing tax deductions and bonus depreciation for construction equipment (63 percent).

“It would appear that Washington is not here to help as far as contractors are concerned,” Simonson said.

   

Tagged categories: Associated General Contractors (AGC); Commercial Construction; Construction; Economy; Government contracts; Hiring; Jobs; Market forecasts; Retail; Schools; Wastewater Plants

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