Yet, qualified worker shortage remains an issue and wages are flat
The Marcum Commercial Construction Index for the first quarter of 2019 reports the highest levels of private nonresidential construction spending ever recorded. The index is produced by Marcum’s National Construction Services group.
STRONG SPENDING
Bolstered by increasingly strong spending in manufacturing construction, private nonresidential construction spending reached $460 billion in March, on a seasonally adjusted, annualized basis. This represented a gain of 2.1 percent from a year earlier. Manufacturing construction spending was $70.3 billion for the month, up 10.3 percent.
Public construction spending in March increased 9 percent year-over-year, to $314.6 billion. Spending in the highway and street category expanded 13.4 percent, surpassing power as the largest nonresidential construction subsector.
Spending in all 16 nonresidential construction subsectors totaled $775.2 billion in March, up 4.8 percent from a year ago. The greatest percentage gains were in water supply (13.8 percent), conservation and development (13.5 percent), and highway and street (13.4 percent). Only three subsectors—commercial, religious, and communication—registered declines for March as compared to a year earlier.
ONGOING MOMENTUM
Anirban Basu, the report’s author and Marcum’s chief construction economist, says, “With lengthy backlogs in hand and given the ongoing momentum apparent in the U.S. economy, contractors have little reason for concern regarding near-term demand for construction services. Accordingly, hiring activity continues to be robust even in the context of large-scale construction skills shortfalls.”
Nonresidential construction added 32,400 net new jobs in April and 163,000 year-over year. In parallel, the industry’s unemployment rate continued to fall, dropping 2.2 percentage points in April from the same month a year ago. The 4.7 percent unemployment rate in April was the lowest construction unemployment recorded for any April since the Bureau of Labor Statistics began reporting this statistic in 2000.
WORKERS AND WAGES
“Given both quantified and anecdotal information regarding the growing scarcity of workers, one might suspect that construction wages would be surging. But they are not. Average hourly earnings for construction employees increased 3.1 percent over the past calendar year, a tenth of a percentage point slower than the average for all industries,” the report says. Mr. Basu attributes the apparent discrepancy to a composition shift in the construction workforce, with older, better-compensated workers transitioning to retirement or less physically taxing jobs and a shortage of new skilled workers to replace them.
Marcum’s national construction leader, Joseph Natarelli, says, “Our first quarter commercial construction index is highly encouraging about the current state and near-term future of the construction industry. However, none of these promising data will translate to profits or success if there are not enough people to do the jobs. Based on what we’ve been seeing in our indices for quite a while, a future labor shortage is a real possibility, which always means higher wages. The good news is that the salary increases we’re seeing in the industry aren’t all that high right now—about 3 percent. To secure the future, we need to ask questions, today: Is there the bench depth to replace retiring workers? Are there the education and skill development programs up and running to nurture that next generation of tradespeople? It’s on us to know the answers and, whenever possible, to work with our communities and trade organizations to see that the answers to both questions are “Yes!”.
For more information
One of the leading construction accounting firms in the U.S., Marcum LLP’s Construction group provides audit, consulting, and taxation services to clients ranging from startups to multi-billion-dollar enterprises. The group’s professionals, among the country’s foremost experts in construction accounting, are frequent industry authors and speakers and also serve as technical reviewers for the AICPA’s construction audit and taxation guides. For more information, visit www.marcumllp.com.
Modern Contractor Solutions, June 2019
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