Is there really a labor shortage in construction?

8/22/2021

Most people don’t understand the drivers of labor shortages in construction.

If you listen to conventional wisdom about the labor situation in construction, you’d think the industry is facing a labor crisis driven by a reduction in people working in the industry.

Search for construction labor shortage. You'll find article after article about how “kids these days don’t want to do hard work” so they’re all going to college and now nobody wants to weld anymore.

If you believe this labor shortage thinking you’re wrong and we’re going to show you why.

We know this for sure, construction labor data tells a different story.

 

Is the construction industry losing more people to retirement than are coming into the industry?

The answer is no, and this is an easy data point to track.

Looking at total employment data shows whether employment rolls are growing or shrinking. Construction labor data is released monthly so you can look at how the total employees are growing or shrinking every month.

If more people are retiring than entering the market in a month or year, then the overall employment numbers will go down. If more people enter the labor market than leave then the overall number will increase.

Looking back at the data, what does it tell us?

Let’s look at employment data from January 2010 through May 2021. This represents one hundred thirty-seven (137) months of data.

In January 2010, approximately 5.2 million people worked in construction. By May of 2021, one hundred thirty-seven (137) months later, this number increased by 2.3 million people to a total of 7.5 million total employees!

63% of the months showed an increase in employment over the prior month.

Even factoring in the improvement in unemployment rate over that time (from 24.7% to 6.7%) the increase in the overall labor pool is still over one million people from 6.9 million people to 8 themillion.

Any way you look at the numbers, the overall construction labor pool increased by at least 16% since 2010.

There can’t be a net exodus of people when the overall construction labor pool is growing.

 

What is really happening with construction employment?

The quick answer is the construction labor market has been on a long-term trend of employment growth. Since 1939 when the BLS began keeping labor statistics on the construction industry through today, the industry has steadily grown its overall employment numbers. Whether you look at the overall number of people employed in construction or construction employment as a percentage of the population, the results are the same. The construction industry is creating jobs and bringing new people into he industry all the time.

That said, the labor shortage that people talk about is still real, most of time.

The driver of the shortage, however, is much different than most people believe. Labor shortages are driven by industry growth. As towns develop and infrastructure expands, the construction industry has had to adapt and grow to meet the ever-larger challenge. At times the growth outpaces the influx of new people and at those times there are labor shortages.

We’ve outlined in an earlier article how to calculate Total Available Construction Labor (TACL) which is a data driven indicator of construction labor shortages.

 

What has the impact been on labor wages?

Construction labor wages have been on the rise. In January 2015 the average hourly wage in construction was $24.99. As of mid-2021 that number is now $30.60. The past five (5) years beginning with 2016 construction wages have grown an average of 3% per year. That number outpaces many industries. While these numbers deal with averages across the industry, there are still trades that are paid higher than others in any economy.

Higher wages are driven by supply and demand. In a true labor shortage situation, we would expect wages to begin rising at a faster pace as demand outpaces supply. This still may be on the horizon for construction though the industry is not currently facing a significant labor shortage.

The challenge facing industry wage increases as of mid-2021 is the impact from the downturn in the spring of 2020 due to COVID-19. That downturn caused a spike in unemployment – from 5.4% in January 2020 to 16.6% by April 2020. Those layoffs put a significant number of people out looking for work and suddenly a looming labor shortage turned into excess available labor almost overnight. In April 2020 there were approximately 1.3 million people unemployed in the construction industry. On a seasonally adjusted basis, construction labor has still not gotten back to January 2020 levels for total employment.

The trend is clear, however. A labor shortage is on the horizon as the construction industry, which typically lags the rest of the economy, recovers from COVID. Employment has strengthened during 2021 and the approximately 7.4 million employed in construction is still below the all-time high of 7.7 million set in 2007.

 

What are smart construction companies doing to find skilled labor?

Finding good labor is a challenge in even the best of times in the construction industry. Finding good labor is exponentially more difficult in times when the market is tightening. The companies that are best at recruiting understand the full cycle of the recruiting process. These companies focus on building their recruiting funnels and understand how to convert candidates from “names on a list” to engaged and willing applicants for open positions.

These companies think about three phases of recruiting:

  1. Creating Awareness. How many candidates know anything about your company? The point of this phase of recruiting is name recognition. When people hear your name and see your logo do they know who your company is? This is a combination of general “billboard” type advertising as well as building your list of potential candidates for the future.
  2. Building Interest. When people know who your company is, why should they care? Do they engage with your social accounts? Read your newsletter? This is your opportunity to capitalize on awareness and drive deeper understanding of your company – and in doing so create interest from the candidates for working from you in the future.
  3. Sparking Action. This is where the rubber hits the road. When you have an open job, how quickly are people applying? If you’ve handled your business in steps 1 and 2, and by adding a few strategies now you’ll have no trouble finding candidate when the time is right. You want to communicate clearly about the job and in this article we break down the eleven (11) key elements of a traveling welder job description.

 

How many construction jobs go unfilled every month?

Total job openings in construction is another data point tracked by the government. This number can fluctuate quite a bit but in general over the past few years it hovers in the 200,000 to 300,000 every month. These are the jobs that are paying, on average, $30.60 for non-supervisory workers. These are readily available, high paying jobs!  

 

What are the most in demand construction trade jobs?       

The largest population of construction trade workers is general laborers. There are about 1.7 million people employed as construction laborers in the United States. From the standpoint of total numbers, this is the most in demand construction trade job. Construction laborers are also expected to grow at a pace that is faster than the overall economy.

The other way to look at this is identifying where supply and demand are out of synch with each other. This typically happens in two scenarios. The first is when a company’s pay rates are lower than the market value for positions. There are lots of companies out there who are looking to pay at the very bottom of the pay range for a construction trade job and in doing so they have a lot of trouble filling the positions with quality people. There will always be a demand for cheap labor, and we encourage everybody (companies and job seekers) to avoid this situation. It does harm to the industry in the end.

At Road Dog Jobs we have a lot of insight into traveling construction jobs. The jobs on our site tend to focus on industrial construction jobs and per diem construction jobs. We see thousands of jobs and job seekers every day and in the world of industrial construction the most sought after trades are always welders, heavy equipment operators, pipefitters, pipe welders, millwrights and electricians. If you’re looking to get a job in construction with no experience, these are good trades to be focusing on.

 

Are more trade schools helping grow construction skilled trade labor pool?

Typically called Career and Technical Education (CTE) schools, the number of trade schools in the United States has been on the rise. These schools are some of the best places, for example, to learn how to weld.

Road Dog Jobs runs a Facebook group for welding jobs. We recently asked the group members what the best welding schools in the country are, and got several great answers. We heard about the Tulsa Welding School, Western Welding Academy, Missouri Welding Institute, Hobart Institute of Welding Technology, Coahoma Community College, as well as on the job training, apprenticeships programs, the US Navy and several others. There are lots of great resources out there.