Labor Shortage Slows New Construction

Labor Shortage Slows New Construction

Not long ago, construction jobs were scarce. When the Great Recession hit in 2008 and 2009, 31% of laborers left the construction industry, and they haven’t come back. In fact, the National Association of Homebuilders (NAHB) estimates that there are 200,000 unfilled construction jobs in the United States. The ratio of job openings to hiring is at its highest level since 2007, when we were at the peak of the housing bubble.

Fortune recently wrote about the two problems that this causes: first, without enough workers, new home construction is slow, which has an overall dampening effect on the economy. Second, with labor costs rising (workers being paid more because the demand vastly outweighs the supply), homebuilders are building more expensive homes, even abandoning the Starter Home market. That, in turn, is bad news for new home buyers, who are not able to buy homes even when the interest rates are near historic lows. Which, also, dampens the economy overall.

According to a survey from the NAHB, the average cost of a single-family home is up almost 14%, but the builder’s costs of land, financing and marketing are only up 3%. The rest of that discrepancy comes from labor. Carpenters and electricians are ranked as the most in-demand workers.

One of the problems, according to Curbed, is that younger people are not joining the labor industry, citing numbers from not only homebuilders, but also autoworkers and factory labor. Randy Strauss, owner of Strauss Construction in Ohio, says that the labor shortage is particularly challenging given President Trump’s plan for massive infrastructure projects, including the border wall:

“Our president is going to build a wall,” says Strauss. “He’s going to have to hire immigrant workers to build it, because I don’t know who else there is going to build it. You get into the Texas markets, near the Mexican border, and that’s who’s doing the work down there.”

Curbed further cites the underlying issue as being a lack of vocational training. Vocational schools are being ignored at a time when plumbers can make $100,000 a year.

The NAHB survey found that 78% of construction companies report a shortage in both rough carpentry and framing, and 75% in finish carpentry.

Said Ken Simonson, the Chief Economist for the Associated General Contractor of America (AGC): “It appears that many non-residential construction firms have run out of people to hire.” 

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