Dec. 2, 2016
By: John Roberts, Executive Vice President, JLL Houston
With both construction and overall U.S. unemployment rates near record lows, and development volumes at cycle highs, a lack of construction labor continues to be a challenge in all U.S. markets.
Skilled labor job openings have increased nationally, yet gone unfilled for longer than the U.S. average. The resulting hiring slowdown in U.S. markets is due to a lack of labor, rather than a decline in construction jobs. The size of the labor pool is rebounding from the downturn, but at a much slower rate than demand. In the third quarter, construction unemployment decreased 1 percent year-over-year to 4.5 percent, the lowest level in more than 14 years.
The lack of skilled laborers has placed pressure on development timelines and budgets. Top U.S. markets can expect to see a continued labor crunch in the construction industry over the course of the next quarter, as the available skilled workforce remains slim.
Rising demand for labor has placed upward pressure on national average hourly construction wages. In the third quarter of 2016, the average hourly construction rate was up 3 percent year-over-year to $29.98. Labor costs will continue to rise over the next year.
Why the labor shortage?
Behind this labor shortage is the startling fact that the pool of construction labor today is 23 percent smaller than in 2007. Following the recession in 2008, many construction workers left the industry in search of jobs in other fields and have chosen not to return. While the construction labor pool has rebounded slightly, it is showing signs of leveling out in terms of organic growth.
Construction to Contract in 2017
Construction spending in the third quarter reached cyclical highs – with more than $317 billion being spent. Moreover, this comes at a time when construction costs continue to break records alongside increased spending. As demand for new construction begins to normalize across regions and property types, we can expect to see various markets correct. By mid-year 2017, softening construction volumes in some markets will begin to alleviate the pressure of widespread labor shortages. As the market further normalizes in 2017, U.S. markets can expect to see a national slowdown in the construction industry by the end of 2017.
To learn more about this and other trends affecting the construction industry download JLL’s Q3 U.S. Construction Outlook.
About the Author
John Roberts is an Executive Vice President and the Houston lead for JLL’s Project and Development Services group. With more than 35 years of experience, John specializes in leadership, construction management, general construction and interior construction. Over the course of his career he has managed more than 14.8 million square feet of design and construction projects.