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AGC's Data DIGest: September 8-15, 2015

Contractors report major difficulty filling craft positions as hiring plans strengthen

Editor’s note: Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.

Nearly four out of five contractors (79%) are having trouble filling hourly craft professional positions, while 52% report difficulty filling salaried positions, based on 1358 responses to a survey and analysis AGC released on Thursday. Of 21 crafts, respondents reported the most difficulty finding carpenters (reported by 73% of the firms that employ them now), sheet metal installers (65%), concrete workers (63%) and electricians (60%). But even the most available category of hourly workers, traffic control personnel, was reported hard to find by more than one-quarter (26%) of respondents. Among 10 types of salaried professions, the scarcest were project managers and supervisors (55% reported difficulty), followed by estimating professionals (43%) and engineers (34%). To attract and maintain workers, firms say they are increasing base pay rates (56% of firms for hourly workers, 48% for salaried workers), providing incentives or bonuses (23% and 29%, respectively), increasing contributions to benefit plans or improving employee benefits (23% and 23%), and paying more overtime (165 and 4%). Some firms have increased their use of subcontractors (43% of respondents); staffing companies (33%); labor-saving equipment, tools or machinery (19%); lean construction (13%); offsite prefabrication (9%); unions (9%); or building information modeling (7%). Many firms report losing workers to other construction firms in their area (36% say that about hourly workers, 24% about salaried workers), to other construction firms outside their area (13% and 11%, respectively), to other industries in their area (31% and 12%) or outside their area (9% and 5%). Large numbers of respondents say that in the coming 12 months it will continue to be hard to hire hourly workers (53%) or salaried workers (37%) or will become harder (25% and 24%, respectively). Half rate the overall quality of the local pipeline for training new hourly craft workers as below average (33%) or poor (17%), although only one-fifth say that about salaried workers (17% below average, 4% poor).

"U.S. employers predict the strongest hiring plans since the fourth quarter of 2007 in the final three months of this year," ManpowerGroup reported on September 8 in releasing its latest quarterly survey of 11,000 U.S. employers. Employers in all 13 industry sectors included in the survey have a positive outlook for the fourth quarter. Employers in construction "expect the hiring pace to slightly increase" in the Midwest and South, with a "moderate decrease" in the Northeast and a "moderate improvement" in the West.

The producer price index (PPI) for final demand was unchanged in August but declined 0.8% over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. The PPI for final demand construction, not seasonally adjusted, dipped 0.1% in August and rose 1.9% over 12 months. The overall PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings—climbed 1.8% since August 2014. The 12-month increases ranged from 0.5% for healthcare construction to 1.7% for warehouses, 1.8% for schools, 2.1% for industrial buildings and 2.4% for offices. PPIs for new, repair and maintenance work on nonresidential buildings fell 0.2% for plumbing contractors from August 2014 to August 2015 and rose 1.1% for roofing contractors, 3.2% for concrete contractors and 3.8% for electrical contractors. An expanded set of PPIs for inputs to construction, excluding capital investment, labor and imports, adds services to the previous PPI for construction industries, goods (formerly called inputs to construction industries). Goods constitute 60% of the index (including 7% for energy); services, 40% (trade services, 25%; transportation and warehousing services, 4%; other services, 10%). The overall PPI for inputs to construction decreased 0.3% from July to August, as the index for services rose 0.4% for the month but was outweighed by declines of 0.3% in the index for goods less food and energy and 5.4% for the energy PPI. The PPI for all goods used in construction fell 3.9% over 12 months. Materials important to construction that had notable one- or 12-month price changes include diesel, down 2.2% for the month and 38% over 12 months; steel mill products, -0.7% and -14%, respectively; copper and brass mill shapes, -4.0% and -14%; aluminum mill shapes, -0.3% and -9.9%; lumber and plywood, -1.4% and -9.1%; flat glass, 0.9% and 4.8%; and cement, 0.4% and 7.4%.

"Demand is soaring for the metal-framed glass panels, or curtain wall, used to sheath skyscrapers," the Wall Street Journal reported on September 8. "Glass manufacturers and fabricators can't keep up....In the meantime, builders are reporting that curtain-wall prices, which have risen more than 30% in the past 18 months, are setting records....Delays are also a problem: Several towers in San Francisco's trendy Rincon Hill neighborhood...are standing bare while their builders wait for glass....Scott Kinter, a senior vice president with AvalonBay Communities Inc., one of the largest U.S. apartment-builders, said...he expects a significant curtain-wall shortage in the fourth quarter of 2015 and into early 2016. Prices are up between 35% and 45% from 2013, he said."

The value of nonresidential construction starts, not seasonally adjusted, fell 35% from August 2014 to August 2015 and 1.8% year-to-date (YTD) for the first eight months of each year, CMD (formerly Reed Construction Data) reported on Monday, based on data it collected. Institutional building starts fell 3.5% YTD, while commercial building starts dipped 0.7%. Heavy engineering starts decreased 6.3%. The small and volatile industrial building starts category jumped 47%.

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.