Construction employment continued to show strength across much of the United States through November 2017, when there were 191,000 more workers in the construction industry than during the same month a year earlier, and the construction unemployment rate fell by 0.7% to 5%, the lowest it’s been on record for the month of November, according to estimates released yesterday by Associated Builders and Contractors, a national trade group representing more than 21,000 members.
However, the industry still struggles with labor shortages that could be inhibiting investment and new construction.
During the first nine months of 2017, month-by-month employment growth was “minimal,” due primarily to “historically low unemployment” that limited the new construction talent pool, according to JLL’s Construction Outlook for the third quarter of 2017, which the market research and consulting firm released late last month.
During the third quarter of 2017, construction-related spending inched up by only 1.9% from the same period in 2016. “While topline spending is still increasing, consecutive quarters are demonstrating smaller and smaller gains over past years—underlining the trajectory towards a mature and stable industry,” JLL writes. Percentage growth of year-over-year spending decreased for nine out of the preceding 11 months, but was still above zero, “pointing to a tapering growth curve.”
With qualified construction workers being harder to find, labor costs were volatile through the first nine months of last year. Image: JLL Research
Citing Census Bureau estimates, Associated Builders and Contractors posted that nonresidential construction spending declined in November by 1.3%, to $719.2 billion, compared to the same month a year earlier. Private nonres spending was down by 3.1%, while public-sector nonres spending grew by 1.7%. The gainers included commercial, educational, lodging, transportation, healthcare, and public safety. Manufacturing construction took the biggest hit, down 15.6%.
Commercial real estate has proven over the past several years that it can perform well regardless of how the economy in general is growing. “Right now we see little in fundamentals to cause concern about real estate as an asset class,” JLL writes.
Public construction, infrastructure and public works projects picked up steam during the third quarter of 2017, while single-family home construction grew at nearly double-digit annualized growth, which is expected to continue in 2018. Multifamily starts, on the other hand, dipped.
While the groundbreaking of large scale private commercial projects began to scale back due to stretched-out timelines, commercial renovation and fit-out work strengthened, and should prevail through the next several quarters and beyond into 2019, JLL predicts.
The cost of building slowed in the third quarter, up by just 3% from third quarter 2016. But it still grew faster than construction spending primarily because of increasing labor costs. (Wages grew by nearly 3.4%, on an annualized basis, in the third quarter of 2017.) Indeed, JLL expects labor shortages to persist through 2018, at least, and for construction costs to be up another 3% this year. JLL expects wage growth to accelerate, potentially hitting 5% or higher during peak building seasons.
The severe weather events that hit certain areas of the country had a surprisingly minor impact on the availability of most building materials. Nevertheless, materials costs rose by 3% in the third quarter compared to the same period a year ago, and those costs “are beginning to outpace current demand,” says JLL. Impending tariffs on Canadian lumber imports could jack up lumber prices for U.S. purchasers by 20% this year.
Manpower shortages, and the prospect that labor and products will cost more, could finally push the construction industry to embrace technology to a greater degree than it has done so to this point. JLL sees BIM, artificial intelligence and big data, and prefab and offsite construction as the three technologies that show the most promise this year.
Related Stories
Sponsored | | Sep 30, 2014
What are you doing to win business and improve morale?? VDC Director Kris Lengieza shares ways to do both
Bluebeam's Sasha Reed sits down with Kris Lengieza, Director of Virtual Design and Construction for Stiles Corporation, to learn how he approaches change management. SPONSORED CONTENT
Sponsored | | Sep 30, 2014
How project managers can manage technology
Not long ago, the role of a construction project manager revolved around working with people: employees, vendors, consultants, designers, subcontractors and owners. Today, project managers primarily manage information. SPONSORED CONTENT
| Sep 30, 2014
With its 'stacked volumes' scheme, 3XN wins bid to design high-rise in Sydney
By dividing the 200-meter building into five separate volumes and placing atria throughout each volume, the spaces become smaller, more intimate social environments, according to the Danish architects.
| Sep 29, 2014
10 common deficiencies in aging healthcare facilities
VOA's Douglas King pinpoints the top issues that arise during healthcare facilities assessments, including missing fire/smoke dampers, out-of-place fire alarms, and poorly constructed doorways.
| Sep 29, 2014
Snøhetta releases final plan for terraced central library in Calgary
The competition-winning New Central Library is now in the final design stages, after two years of community engagement on the part of design firms Snøhetta and DIALOG.
| Sep 25, 2014
Jean Nouvel unveils plans for National Art Museum of China
Of the design, Nouvel describes it as inspired by the simplicity of “a single brush stroke.”
Sponsored | | Sep 25, 2014
Your business doesn’t always need to change
By now, the idea that organizations must adapt to maintain both relevance and market share is so ingrained that it’s been reduced to pithy sayings. But is constant adaptation always the best policy? SPONSORED CONTENT
| Sep 24, 2014
Must see: Semi-submerged hotel planned for Qatar's man-made island
Plans for a new hotel in the Persian Gulf are taking Dubai’s Palm Islands concept to a whole new level—underwater, that is.
| Sep 24, 2014
5 business lessons from a 43-year Star veteran
Mary Ed Cain was supposed to be born a boy. That was the first time she surprised everyone. The second time came on a daily basis during her 43-year career at Star Building Systems. SPONSORED CONTENT
| Sep 24, 2014
Architecture billings see continued strength, led by institutional sector
On the heels of recording its strongest pace of growth since 2007, there continues to be an increasing level of demand for design services signaled in the latest Architecture Billings Index.
