The Associated General Contractors of America (AGC) and Sage Construction and Real Estate have released the Contractors Remain Confident About Demand, Worried About Labor Supply: The 2019 Construction Hiring and Business Outlook Report.

The outlook was based on survey results from over 1,300 firms from 49 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans.

For all 13 categories of projects surveyed, respondents that expected the market segment to expand exceed those that expect the market to contract. For every segment, between 23 to 32% of respondents expect the dollar volume of projects they compete for to increase. Meanwhile, for all but one segment, between 11 to 16% of respondents foresee less work available in 2019. The difference between the positive and negative responses – the net reading – was between 10 to 17% for every category except multifamily.

“Construction executives appear to remain confident about their market prospects for 2019 and plan to add headcount to cope with the added workload,” says Stephen E. Sandherr, the association's chief executive officer. “Even as they are optimistic about growing demand, contractors are concerned about finding qualified workers to execute projects.”

Public building construction scored the highest net positive reading of 17%. Three other segments had a 16% net positive: highway, K-12 school, and hospital construction. Projects for federal government agencies, and retail/warehouse/lodging both had a net positive reading of 15%. Water & sewer and transportation facility construction had a net positive reading of 14%.

Four categories had a slightly less-positive net reading: private office construction (13%); manufacturing construction (12%); higher education construction (11%) and power construction (10%). The lowest net positive reading was for multifamily residential construction, at 5%. Association officials said this may indicate that multifamily construction has outpaced demand for now in some locations.

Nearly four out of five contractors (79%) plan to increase their workforce this year, up from 75% at the start of 2018 and 73% at the start of 2017. However, just under half of firms report their expansion plans will only increase the size of their firm by 10% or less. About one-fifth of respondents plan to increase headcount by 11 to 25%. Only 7% of respondents plan to increase employment by more than 25%.

Despite firms’ plans to expand headcount, 78% report they are having a hard time filling salaried and hourly craft positions. That share was down slightly from 83% at the start of 2018. In addition, 42% expect it will continue to be hard to hire in the next 12 months and 26% expect that it will become harder to hire in 2019.

These labor shortages are having an impact on construction costs and project schedules, association officials noted. One-third of respondents report that staffing challenges drove costs higher than anticipated. In reaction, 37% of firms are putting higher prices into new bids and contracts. Similarly, 34% report projects have taken longer than they anticipated.

Firms continue to raise pay and provide bonuses and benefits in response to labor shortages. 59% of firms report they increased base pay rates. 29% provided incentives and/or bonuses. 24% of firms increased contributions or improved employee benefits to cope with workforce shortages.

Many firms are also investing more in training programs. 63% report a plan to increase investments in training and development in 2019, up from 52%. Large firms are more likely to do so, with 71% of companies with more than $500 million in revenue saying they plan to increase investments in training, compared with 59% of firms with $50 million or less in revenue.

“As growing demand and labor shortages force contractors to do more with less, many firms are increasing their investments in labor-saving technologies and techniques like building information modeling, lean construction and robotics,” says Ken Simonson, the association's chief economist. He noted that 32% of respondents report their firms are using methods to reduce onsite worktime, including lean construction, virtual construction techniques or off-site prefabrication. 28% are investing in labor-saving equipment, including drones, robots and 3-D printers.

42% of respondents will increase their IT investments in 2019. 30% of these firms plan to increase their investments in project and document management software. 31% show comfort with moving information to the cloud, compared with 24% last year. Even as firms embrace information technology, 26% report their biggest IT challenge is a lack of time necessary to implement new systems.

Though contractors are optimistic about demand for construction services in 2019, the outlook is based on responses that were provided before the partial federal government shutdown and when a halt to pending tariffs on a wide range of Chinese goods had been announced.

“This means that if Washington officials can’t find a way to work together to continue needed regulatory reforms and enact new infrastructure funding, many contractors’ more optimistic expectations will not be met,” Sandherr says. “And many contractors will be squeezed by growing costs for materials at a time when an expanded trade war will likely undermine private-sector demand if American and Chinese officials cannot resolve their trade disputes.”

AGC is committed to making sure Washington leaders act to support continued economic growth in 2019. The association will continue to advocate for new infrastructure investments, regulatory reforms, federal funding for career and technical education, and comprehensive immigration reform.

“Our goal is to ensure that the construction industry expands in 2019 amid growing demand for new projects and an infusion of new and qualified workers,” Sandherr says. “If that happens, the entire economy will benefit.”

Click here to view the survey results.