Date: January 21, 2014
More Firms in Utah Plan to Start Hiring than in Any Other
State; As Industry Grows Firms Will Contend with Rising Costs, Regulations and
Tougher Competition
Many firms plan to start hiring again and most contractors
predict demand will either grow or remain stable in virtually every market
segment this year according to survey results released today by the Associated
General Contractors of America. The survey, conducted as part of Optimism Returns:
The 2014 Construction Industry Hiring and Business Outlook, provides a
generally upbeat outlook for the year even as firms worry about growing worker
shortages, rising costs and the impact of new regulations and federal budget
cutting.
“Contractors are more optimistic about 2014 than they have
been in a long time,” said Stephen E. Sandherr, the association's chief
executive officer. “While the industry has a long way to go before it returns
to the employment and activity levels it experienced in the middle of the last
decade, conditions are heading in the right direction.”
Sandherr noted that many firms plan to begin hiring again,
while relatively few plan to start making layoffs. Forty-one percent of firms
that did not change staff levels last year report they plan to start expanding
payrolls in 2014, while only two percent plan to start making layoffs. However,
net hiring is likely to be relatively modest, with 86 percent of firms
reporting they plan to hire 25 or fewer new employees this year.
Among the 19 states with large enough survey sample sizes,
100 percent of firms that did not change staffing levels last year in Utah plan
to start hiring new staff this year, more than in any other state. (Click here
for state-by-state survey results.)
Contractors have a relatively positive outlook for virtually
all 11 market segments covered in the Outlook, in particular for private-sector
segments. For five of those segments, at least 40 percent of respondents expect
the market to expand and fewer than 20 percent expect the market to decline in
2014. The difference between the optimists and pessimists – the net positive
reading – is a strong 28 percent for private office, manufacturing and the
combined retail/warehouse/lodging segments, and 25 percent for power and
hospital/higher education construction.
Among public sector segments, contractors are more
optimistic about demand for new water and sewer construction, with a net
positive of 17 percent. Contractors are mildly optimistic about the market for
highway construction, with a net positive of 10 percent. Respondents are almost
equally divided regarding the outlook for the other four segments, ranging from
net positives of 5 percent for public buildings, 4 percent for schools, 3
percent for transportation facilities other than highways, to a negative of 2
percent for marine construction.
Sandherr added that contractors’ market expectations are
significantly more optimistic than they were at this time last year. At that
time, more contractors expected demand for highway, other transportation,
public building, retail, warehouse and lodging, K-12 schools and private
officers to shrink than expected it to grow.
Many contractors also report they plan to add new
construction equipment in 2014. Seventy-three percent of firms plans to
purchase construction equipment and 86 percent report they plan to lease it
this year. The scope of those investments is likely to be somewhat limited,
however. Forty-four percent of firms say they will invest $250,000 or less in
equipment purchases and 53 percent say they will invest that amount or less for
new equipment leases.
One reason firms may be more optimistic, association
officials noted, is that credit conditions appear to have improved. Only 9
percent of firms report having a harder time getting bank loans, down from 13
percent in last year’s survey. And only 32 percent report customers’ projects
were delayed or canceled because of tight credit conditions, compared with 40
percent a year ago.
“While the outlook is significantly more optimistic than in
years past, there are still areas of concern for most contractors,” said Ken
Simonson, the association's chief economist. “Many firms will struggle to find
enough skilled workers, cope with escalating materials and health care costs,
and comply with expanding regulatory burdens.”
Ninety percent of construction firms report they expect
prices for key construction materials to increase in 2014. Most, however,
expect those increases will be relatively modest, with 43 percent reporting
they expect the increases to range between 1 and 5 percent. Meanwhile, 82
percent of firms report they expect the cost of providing health care insurance
for their employees will increase in 2014. Despite that, only 1 percent of
firms report they plan to reduce the amount of health care coverage they
provide.
Simonson noted that as firms continue to slowly expand their
payrolls, they were likely to have a harder time finding enough skilled
construction workers. Already, 62 percent of responding firms report having a
difficult time filling key professional and craft worker positions. And
two-thirds of firms expect it will either become harder or remain as difficult
to fill professional positions and 74 percent say it will get harder, or remain
as hard, to fill craft worker positions.
Those worker shortages are already having an impact, the
economist added. Fifty-two percent of firms report they are losing construction
professionals to other firms or industries and 55 percent report they are losing
craft workers. As a result, a majority of firms report they have improved pay
and benefits to help retain qualified staff. One reason they are likely worried
is that nearly half of the firms believe training programs for new craft
workers are poor or below average.
Adding to their challenges, 51 percent of contractors report
that demand for their services is being negatively impacted by federal funding
cuts, new federal regulations and/or Washington’s inability to set an annual
budget. “It would appear that Washington is not here to help as far as
contractors are concerned,” Simonson noted.
Association officials added that survey respondents would
prefer that Washington officials work on other priorities. Seventy-seven
percent of firms reported listed having Washington find ways to make it easier
to prepare the next generation of skilled workers as a top priority.
Sixty-three percent listed repealing all or part of the Affordable Care Act as
a top priority. And 63 listed renewing tax deductions and bonus depreciation
for construction equipment as a top priority.
The Outlook was based on survey results from over 800
construction firms from every state and the District of Columbia. Varying
numbers responded to each question. Contractors of every size answered over 40
questions about their hiring, equipment purchasing and business plans
Source: AGC
of America
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