Construction boom continues even though labor shortages are a problem

by George Jared (gjared@talkbusiness.net) 418 views 

Work continues on the Red Wolf Convention Center on the Arkansas State University campus in Jonesboro.

Relatively low interests rates and a booming economy have led to record-setting construction across Arkansas and especially in the state’s northeast corner. Jonesboro, the region’s hub city, is on pace to smash its all-time building permits mark in 2018, but there is a looming problem that could impact the area and many other parts of the country.

There are at about 10 million construction workers in the country, and from 2016 to 2026, the number of construction jobs is projected to explode by an additional 747,600 jobs, an 11% jump, according to the U.S. Bureau of Labor Statistics (BLS). As of 2016, 3.8 million of these workers were employed in residential construction. Jobs of these types will grow at a faster average than all occupations, and the average wage of $44,730 for these workers is about $7,000 more than the median annual wage for all occupations combined.

Skilled construction laborers — electricians, plumbers, roofers, etc. — are on average 50 years old, and there are about 200,000 construction jobs available now, according to the BLS. The number will only grow as the economy improves and demand grows for houses and other structures.

For those seeking skilled construction jobs, the pay can be higher than with other jobs. The median income for a carpenter is $45,170, while drywall and ceiling installers can make $43,970, according to the BLS. Electricians make $54,110, and plumbers make on average $52,590.

A NATIONAL PROBLEM
An Associated General Contractors survey showed 75% of all construction companies nationwide expected to hire new employees in 2018, and at least 82% of them anticipated it would be difficult to find qualified workers.

At least 2.3 million construction workers left the field during the Great Recession and many have not returned, according to a report by the National Association of Home Builders (NAHB). The number of construction workers has steadily grown since 2011, but the worker deficits could impact how long it takes to complete projects, and the problem will probably only grow, the NAHB reported.

“While it is promising to see that residential construction employment is on the rise, it is still far below where we need to be to meet the increasing demand for housing,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “We will continue to push for programs and policies that address the labor shortage, such as workforce development initiatives and comprehensive immigration reform.”

Arkansas is in the midst of a construction surge. Keith Wingfield of Little Rock, president of the Arkansas Home Builders Association, said residential builders are enjoying their best year in a decade. The homebuilding industry “began crawling out” of the recession of 2008 sometime in 2010, Wingfield said, with conditions improving in each successive year.

In 2013 and 2014, conditions were somewhat stagnant, Wingfield said, but this year, “housing has really taken off” with a significant increase in housing starts recorded so far in 2018. He believes consumers “have a lot of sense of confidence that they’re going to have a job and sufficient funds to buy a house.”

Because of the high demand, Wingfield said, building material prices have increased significantly, with lumber prices rising 55% since January. The tariff now in place on Canadian softwood lumber represents only a small percentage of that increase, he said, but “as an association, we’ve asked the Trump administration to get back to the table on softwood lumber tariffs.”

LABOR PAINS
The other issue affecting residential construction, Wingfield said, “is definitely labor.” That is, the shortage of skilled workers.

“It’s common just about everywhere” he said. “As you can imagine, folks who were in the trades in 2008 when the crash occurred, there were so many who were hurt by that. Several decided they needed something more consistent and more stable, so they got out of the market and have gone to other jobs. … No one wants to go back to being a drywall hanger or drywall finisher, or even a plumber or electrician,” said Wingfield, who operates the custom home building firm River Rock Builders.

Construction industry employment in Arkansas peaked at 57,300 in June 2006, only to fall below 50,000 in October 2009 at 49,800. Sector employment would bottom out a 44,500 in September 2013, and rose again above 50,000 in August 2015 at 50,400. But sector growth has not returned to pre-recession levels, with employment of 51,900 in March 2017 being the highest tally since August 2015.

Arkansas Association of Home Builders chapters around the state are reaching out to high schools in their areas seeking partnerships to develop training programs so people who want to learn a building trade will have some training in their preferred vocation before they graduate from high school, Wingfield said.

The need for skilled tradespeople will continue for the foreseeable future, Wingfield said. “Until they develop a robot that can frame houses, hang drywall or do plumbing and electrical work,” those trades will be in demand. Despite the high cost of lumber and the shortage of skilled labor, Wingfield said, “We’re having such a great year. The underlying demand is awesome. Give me these issues any day of the week over no business.”

NORTHEAST ARKANSAS GROWTH
Northeast Arkansas is experiencing a construction surge. In the first five months of 2018, Jonesboro has issued $177.54 million in permits, more than was issued in all of 2017 ($147 million), according to the city. It has nearly eclipsed the all-time yearly record of $186 million set in 2016.

The city issued $273 million in 2011, but it was an anomaly. Those permit numbers were fueled by the construction of NEA Baptist Hospital, the largest project of its kind in state history at that time. The strong permit numbers this year are fueled by an expansion project at St. Bernards Hospital ($85 million) and the long awaited start of construction on a convention center/hotel project on the Arkansas State University campus.

Residential building permit numbers are up 35% from 2017 to $27 million, and it’s an almost 30% increase as compared to residential permits issued through the first five months of 2016.

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