Listen to “A Podcast That Builds” host Ben Johnson and Dodge’s Industry Insights Research Director Donna Laquidara-Carr’s second edition of the two-part podcast on the findings from the 2017 Q2 CCI Report. Learn about the construction labor shortage and skilled labor shortage and what they mean for the construction industry. If you haven’t already heard the “Construction Labor Shortage – Part 1”, click here to get caught up. Below is a transcript of this construction podcast.
Ben Johnson:
Hello and welcome back to “A Podcast That Builds”, construction industry experts keeping you in the know with news, trends and analysis that will shape the future of building. I’m your host Ben Johnson, and we’re happy to have Donna Laquidara-Carr back today for part two of our discussion on the construction labor shortage. Welcome back, Donna.
Donna Laquidara-Carr:
It’s great to be here. We have some new data since the last time I was here, so I’m looking forward to discussing the new findings.
Ben Johnson:
Fantastic. And to remind everyone, Donna is the industry insights research director at Dodge Data & Analytics and the report we’re going to be focusing our conversation around again is the Commercial Construction Index or CCI and as the expert on it, Donna, you can remind us what the CCI is.
Donna Laquidara-Carr:
Sure. So every quarter we survey general contractors and trade contractors and we’re trying to use that survey to get a gauge for how they feel about their business and how the construction industry in general is doing. We look at what they report about revenue backlog and confidence and those three answers we roll together into an industry index number. Could the commercial construction index number, but we also ask a lot of other things on the survey to really get a broader picture and to understand the CCI number that we get a little bit better. That type of stuff that we look at includes profit margins, the ability to access financing and their concerns about the construction labor shortage, skills and costs. You know, the kind of things that keep them up at night. And we’ve been doing this survey in the current form since about Q1 2017, but we have, we’re at the point now where we’re starting to see some really interesting trends, especially since some of the questions were in the earlier Beta versions that we sent out in Q3 and Q4 2016.
Ben Johnson:
Great. So now we have three real non Beta quarters, as well as the original Beta findings. You mentioned we have some, some trends that sort of solidify that we can talk about. So, what are the most interesting of those?
Donna Laquidara-Carr:
I mean one thing is the remarkable consistency that we’ve seen since Q1 2017. About how difficult it is to find skilled workers. That number has really stayed remarkably consistent at about 60% you know a couple of percentages higher here, a couple of percentages lower there, but really we’ve seen the industry remain very steady about this. It’ll be interesting to see if that’s still true in the current study that we’re going to do after which we’ll be able to reflect the hurricane data. We are also a though starting to see some shifts in the unskilled workers before this quarter. We really saw very consistent findings there too and they were always, there was always a lot less concerned for unskilled workers than there was for skilled workers and that is still true. I do want to make that point at the onset, but it is interesting that for the first time in Q three we did see a jump in those who reported a high level of difficulty from 12% to 17%. So, it’s a notable difference and it’s if we’re going to be watching this very carefully in the next quarter to see if this is the beginning of a trend and it might get unheard official bump from what’s a, from the demands for unskilled Labor that are going to happen in Florida and Texas to the hurricanes.
Ben Johnson:
Right. So especially in the early phases of recovery, the unskilled labor is really what’s in the highest demand.
Donna Laquidara-Carr:
Exactly. Exactly. So, you know, it’ll be interesting, we might have to go beyond Q4 before we really know if this is something larger to the industry or if that, if we do continue to see a concern about unskilled workers, if that is just artificially boosted.
Ben Johnson:
Yeah. And there, you can almost assume there will be some, some boosts from a Florida and Texas. So we also talked about last time some of the reactions to the skilled labor shortage and we have some more data showing a some increases in the differences between how GC’s and trades considered this. What a, what are those numbers now?
Donna Laquidara-Carr:
Oh, it’s very interesting that right now while we see consistently high numbers across the board that everyone’s asking everyone to work harder. That number has not fluctuated at all. We do actually see trade contractors reporting in a much higher percentage. Half of them a full 50% say they are currently turning down work opportunities. And with GC’s it’s only about a third 30% who say that they’re doing that now because they can’t find enough skilled workers. But this could have implications for GC’s in the long-term if trade contractors keep walking away from opportunities.
Ben Johnson:
Right. So it’s a trickle down from the or trickle up as it were from, from the trades to the GC’s in this case. So, I know we saw some employment trends developing and there’ve been some changes in the, in this report.
Donna Laquidara-Carr:
Right. Well. The real change in this report certainly doesn’t qualify as a trend yet, but we did see some interesting activity going on for the first recorders where we asked about whether they were planning on employing more workers, and again this is general contractors and trade contractors. We saw that about two thirds said that they were going to do so. This was consistent in Q4, Q1, and Q2, now in Q3 in our current study, suddenly we see a drop from two thirds to 53% and we’d not, we’re not sure exactly what’s causing that. It could be anything from being seasonal to something a little bit more significant. However, we do know that it was going on far more among smaller firms that when you’re talking about smaller firms, by numbers of employees, the smallest ones were expected for only 45% we’re expecting to see an increase in their number of employees, but 76% of large firms, we’re expecting to see that increase. And that drop off comes from the smaller firms saying that they’re going to employ less. So we want to keep an eye on this trend first. You want to see if it even reproduces itself in the fourth quarter. And second, we want to see if that pattern reproduces itself because it could suggest something structural going on in the industry. But it’s really too early to say that yet for sure.
Ben Johnson:
So, something I’m always curious about is the where factor. So, what, what kinds of regional differences have become clear?
Donna Laquidara-Carr:
Well, one thing that really leaped out in this quarter’s data much more than we saw it in previous quarters, was that over half of the contractors in the West reported that they were seeing increased backlog. Now, what’s so surprising about this is that it’s one third in all the other regions reported the same thing. So, something is going on in the West where really, they’re getting a much more comfortable backlog and I’m not sure how to explain it, but it will be interesting to see again if it re-emerges. And it’s funny because the West actually reports a pretty high level of difficulty in finding skilled workers. Their level of difficulty is around two thirds, which is similar to the south in the Midwest. But with the increased backlog, they may be the ones that are presented with the biggest challenges in the construction labor shortage.
Ben Johnson:
So those are some great findings. Very interesting. But maybe not terribly surprising. Was there anything surprising that’s surprised you so far?
Donna Laquidara-Carr:
Yes, there was one thing that I really did find quite surprising. Every quarter we look at a question of the quarter the very first report we published, it was on sustainability. This time we looked at skill levels. Next time we’re going to look at job site efficiency. So I’m really looking forward to the Q4 data. But in the skills question, one of the things that really came out that was not only surprising but really promising was the importance of community and communication skills. And that’s for workers on the job site. We asked them to rate a whole bunch of different types of skills and say, how important do you think these are? And communication skills finished very strongly. 79% considered the very important, which was the same percentage that considered technical proficiency. Just their ability to do their job well, important as a skill.
And you know, I was not, I knew communication skills are important. I knew contractors were starting to recognize that more, but I was still very surprised at how strongly this finished. And it was also very interesting that this was one of the weaker skills in terms of what people were actually seeing. Only 39% felt that their workers had strong communication skills. So it does suggest an area that the industry really does need to focus on. And you know, and it, but it’s, but it’s very promising overall because it ties into a lot of other trend data that we’re seeing in the industry at large that says collaboration, the ability to work not just with the people in your company but all the other people on the job site, all the other people involved in the project is really important to the industry. Everyone seems to keep recognizing it. And this idea that communication skills are critical I think feeds into that entire movement towards being more collaborative.
Ben Johnson:
Yeah, it’s really hard to underestimate the importance of collaboration and communication and construction projects. That’s definitely been born out in, in a lot of our research. And just to remind anyone interested in the CCI report that we’ve referenced today, it is available completely free at construction.com. Just go to the Toolkit link and under that Reports and all the CCI reports are there available for free download and all the future reports will also be posted there. So, thank you so much for joining us again today, Donna.
Donna Laquidara-Carr:
This was great. So, I hope we can do this again in the future.
Ben Johnson:
And speaking of collaboration and communication and construction projects, Donna hosted an excellent Webinar. It was called “Why Do Projects Excel”, and that too was available for free on construction.com under the Toolkit to Webinars. Thank you all for joining us again today for “A Podcast That Builds”. We’ll see you next time.