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
| Oct 4, 2022
In dire need of affordable housing, Aspen, Colo. will get a development that provides 277 affordable homes
A few miles from downtown Aspen, Colo., a development will provide 277 new affordable homes for an area experiencing a dire affordable housing crisis.
Green | Oct 3, 2022
California regulators move to ban gas heaters for existing buildings
California regulators voted unanimously recently on a series of measures that include a ban on the sale of natural gas-powered heating and hot water systems beginning in 2030.
| Oct 3, 2022
The College of the Holy Cross completes a $110 million performing arts center
In Worcester, Mass., a one-hour drive from Boston, the College of the Holy Cross has completed its $110 million Prior Performing Arts Center.
Resiliency | Sep 30, 2022
Designing buildings for wildfire defensibility
Wold Architects and Engineers' Senior Planner Ryan Downs, AIA, talks about how to make structures and communities more fire-resistant.
| Sep 30, 2022
Manley Spangler Smith Architects partners with PBK in strategic merger
Manley Spangler Smith Architects (MSSA), a Georgia-based, full-service architectural firm specializing in educational and municipal facilities, announced today a significant development aimed at increasing its capabilities, expertise, and suite of services.
| Sep 30, 2022
Lab-grown bricks offer potential low-carbon building material
A team of students at the University of Waterloo in Canada have developed a process to grow bricks using bacteria.
| Sep 29, 2022
FitzGerald establishes Denver office
The new location bolsters FitzGerald’s nationwide reach and capitalizes on local expertise and boots-on-the-ground to serve new and existing clients seeking to do business in Denver and the Front Range, as well as the Southwest United States, California, and Texas.
| Sep 28, 2022
New digital platform to foster construction supply chains free of forced labor
Design for Freedom by Grace Farms and the U.S. Coalition on Sustainability formed a partnership to advance shared goals regarding sustainable and ethical building material supply chains that are free of forced labor.
| Sep 27, 2022
New Buildings Institute released the Existing Building Decarbonization Code
New Buildings Institute (NBI) has released the Existing Building Decarbonization Code.
| Sep 23, 2022
High projected demand for new housing prompts debate on best climate-friendly materials
The number of people living in cities could increase to 80% of the total population by 2100. That could require more new construction between now and 2050 than all the construction done since the start of the industrial revolution.