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General Contractors Look to Hire Workers and Add Equipment in 2014, AGC Says

Jan. 24, 2014
“Contractors are more optimistic about 2014 than they have been in a long time,” said Stephen Sandherr, the Associated General Contractors’ 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.”

The growing momentum in the rebounding construction market is generating some longer-term optimism among general contractors, and it appears that they’re serious enough to put money on the line. According to a report this week from the Associated General Contractors (AGC), Arlington, Va., 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, the report said.

Under the title “Optimism Returns: The 2014 Construction Industry Hiring and Business Outlook,” the AGC report provides a generally upbeat outlook for the year, to the point that construction firms are increasingly worried about worker shortages, as well as 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 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.”

Many contractors also report they plan to add new construction equipment in 2014. Seventy-three percent of firms have 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.

Forty-one percent of firms responding to the survey who said they did not change staff levels last year reported that they plan to start expanding payrolls in 2014. Only two percent plan to start making layoffs. 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, but the gains are nonetheless significant. Utah led states with the most expected employment growth.

Contractors expressed a relatively positive outlook for virtually every market segment, particularly in the private sector. 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, followed by highway construction, public buildings, schools and transport facilities other than highways.

Sandherr added that contractors’ market expectations are significantly more optimistic than they were at this time last year, when 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.

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 one percent of firms report they plan to reduce the amount of health care coverage they provide.

Contractors said they’re having a harder time finding enough skilled construction workers. Already, 62 percent report having a difficult time filling key professional and craft worker positions. 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.