Optimistic Look at State of Construction in Q3 Commercial Construction Index, but Concerns About Workforce Shortages Persist

By Donna Laquidara-Carr, Industry Insights Research Director, Dodge Data & Analytics

BEDFORD, MA - September 21, 2017 - The current USG+USCC Commercial Construction Index Report (CCI) reveals that overall contractors are finding the state of the construction industry to be strong, but they continue to feel anxiety over workforce shortages. 

The CCI is a quarterly economic index designed to gauge the outlook for and resulting confidence in the commercial construction industry. Each quarter since Q3 2016, Dodge Data & Analytics (DD&A) has surveyed contractors across the country for the CCI in order to better understand their levels of confidence in the industry and top-of-mind concerns.

Most of the underlying economic factors included in the survey are quite strong. The current CCI Report reveals a healthy amount of backlog reported by contractors, with the current average backlog of 9.5 months close to their average reported ideal of 12 months. Nearly all contractors (95%) also report that they expect their revenues to stay the same or increase in the next 12 months, and over one third of contractors (37%) expect their profit margins to increase in the next 12 months.

Despite this overall optimism, there is one area of concern that is still troubling contractors and has been for the last year: workforce shortages. While over half of contractors (53%) expect to employ more workers in the next six months, even more (60%) report a high level of difficulty in finding skilled workers, with almost one third more (31%) reporting a moderate level of difficulty. This concern isn’t just about the number of workers available, but also about the skills they possess, with similar percentages reporting a high (54%) or moderate (37%) level of concern about the adequacy of workers’ skills.

At this point, fewer contractors (39%) report a high degree of concern about the cost of skilled labor than about labor availability or skills, but that may change. There has been a steady increase in the percentage of contractors who report that they are putting in higher bids due to skilled worker shortages in 2017, from 50% in Q1 2017 to 64% in Q3.  And certainly the demands for labor in Florida and Texas for the recovery efforts from Hurricanes Irma and Harvey will adversely impact these workforce issues.

Raising their bids are not the only ways that contractors report dealing with labor shortages. Throughout 2017, roughly 80% of contractors have consistently reported that they ask workers to do more work, the most common strategy. Over one third (38% in Q3) have also consistently reported that they are turning down work opportunities. This response, combined with the submission of higher bids, could force construction prices up in the next few years.

In order to explore this issue more deeply, the Q3 study did a deeper dive into the kinds of skills needed and where there are gaps. The findings demonstrate that safety skills are recognized by 90% of respondents as highly important, with most of the remainder considering them at least moderately important. Fortunately, most contractors (71%) also find that their workforces’ skills are strong in this area.

Other skills rated as important include technical proficiency and communication skills. However, only a little over half (55%) believe their workforce has strong technical skills, and only 30% report that they see strong communication skills among their workers.

Training is one way to enhance skills in the workforce, but engagement in this area varies widely across the industry. Over one third (34%) are highly engaged in offering training, with either training/certification requirements or a formal skills development plan in place. An additional one quarter (26%) report that they regularly communicate to their workers about training opportunities, a more moderate level of engagement.  Another third (33%) are passively supportive of workers who seek out training opportunities on their own, and 7% are not engaged in any of these efforts.

It will be interesting to see how the workforce challenges continue to evolve, and the data on concerns about skilled workforce availability, about the level of skills and about the cost of labor will continue to be tracked on a quarterly basis in the CCI. The fourth quarter study will also feature a look at improving jobsite efficiency, a different way of tackling the challenges created by these shortages.




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