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
Legislation | Oct 10, 2022
Chicago’s updated building energy code provides incentives for smart HVAC, water appliances
The Chicago City Council recently passed the 2022 Chicago Energy Transformation Code that is intended to align with the city’s goal of reducing carbon emissions by 62% from 2017 levels by 2040.
Contractors | Oct 7, 2022
Nonresidential construction spending down 0.4% in August, says ABC
National nonresidential construction spending was down 0.4% in August, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.
Multifamily Housing | Oct 7, 2022
Design for new Ft. Lauderdale mixed-use tower features sequence of stepped rounded volumes
The newly revealed design for 633 SE 3rd Ave., a 47-story, mixed-use tower in Ft. Lauderdale, features a sequence of stepped rounded volumes that ease the massing of the tower as it rises.
Giants 400 | Oct 6, 2022
Top 60 Medical Office Building Contractors + CM Firms for 2022
PCL Construction, Adolfson & Peterson, Swinerton, and Skanska USA top the ranking of the nation's largest medical office building (MOB) contractors and construction management (CM) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Oct 6, 2022
Top 60 Outpatient Facility Contractors + CM Firms for 2022
Whiting-Turner Contracting Co., PCL Construction, Skanska USA, and Power Construction top the ranking of the nation's largest outpatient facility contractors and construction management (CM) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Oct 6, 2022
Top 90 Hospital Facility Contractors + CM Firms for 2022
Turner Construction, Brasfield & Gorrie, DPR Construction, and JE Dunn top the ranking of the nation's largest hospital facility contractors and construction management (CM) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Oct 6, 2022
Top 115 Healthcare Sector Contractors + CM Firms for 2022
Turner Construction, Brasfield & Gorrie, DPR Construction, and JE Dunn Construction top the ranking of the nation's largest healthcare sector contractors and construction management (CM) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report. Note: This ranking factors all healthcare sector work, including hospitals, outpatient facilities, and medical office buildings.
Giants 400 | Oct 6, 2022
Top 90 Healthcare Sector Engineering + EA Firms for 2022
Jacobs, AECOM, WSP, and IMEG Corp. head the ranking of the nation's largest healthcare sector engineering and engineering/architecture (EA) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report. Note: This ranking factors all healthcare sector work, including hospitals, outpatient facilities, and medical office buildings.
Giants 400 | Oct 6, 2022
Top 170 Healthcare Sector Architecture + AE Firms for 2022
HDR, CannonDesign, HKS, and Stantec top the ranking of the nation's largest healthcare sector architecture and architecture/engineering (AE) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report. Note: This ranking factors all healthcare sector work, including hospitals, outpatient facilities, and medical office buildings.
Designers / Specifiers / Landscape Architects | Oct 6, 2022
DAHLIN announces acquisition of Design Line Interiors
DAHLIN Architecture | Planning | Interiors announced today that it is expanding its interiors capabilities with the acquisition of Del Mar, California-based Design Line Interiors.