The construction industry shed 2.2 million workers between January 2007 and last year. So now there's an overabundance of them eager for jobs, right?
Wrong. Contractors are struggling with shortages of workers as the home-building market comes to life and some commercial sectors strengthen. The crunch is affecting a handful of states, including Texas, Arizona, Iowa and Florida. But it's expected to worsen and spread across the USA over the next few years, building officials say. The shortages are already prompting builders to raid each other's job sites for workers.
"It has been a shock for us," says Milton Chicas, who heads recruiting for Wayne Bros., a Kannapolis, N.C.-based commercial builder in the Southeast. "There are so many folks out of work right now, we thought we were going to have a large amount of individuals coming through the door."
During the downturn, hundreds of thousands of laid-off construction workers left the field, retired or moved to other states to find work, leaving some markets without an adequate supply for even the current moderate upswing in activity. After scrounging for odd jobs and hoping for an upturn, many workers retooled to become truck drivers, factory workers or roughnecks in the nation's booming oil and natural gas fields.
Meanwhile, Baby Boomers are retiring and fewer high school graduates are entering the field as parents and school officials promote a college education or training in high-tech fields such as computers.
The result is a widening gap between construction labor demand and supply in some areas.
Nationally, building-permit applications for homes and apartments this year are up 31% over 2011, though they're still well below average and the mid-2000s peak, according to the Census Bureau. Builders are finally responding to record low new-home inventories, historically low interest rates and a modestly improving job market. All construction spending, including commercial and government, in September was up 14% from the market bottom in February 2011.
Yet construction payrolls are virtually unchanged from two years ago at 5.5 million. Contractors are coping with the added workload in part by paying employees more overtime, says Ken Simonson, chief economist of Associated General Contractors of America. Some companies are being cautious following a brutal slump, but others simply can't find workers. Despite the industry's static employment, its jobless rate has dropped from 17.3% to 11.4% the past two years as 320,000 construction laborers stopped working or looking for work, Labor Department figures show.
Twenty-nine percent of home builders surveyed by the National Association of Home Builders in June reported some shortage of framing workers and 6% said there was a serious deficit — only slightly less than in 2006 at the height of the home construction frenzy. By 2017, there could be a shortage of 2 million commercial construction workers, according to the Construction Users Roundtable, a trade group.
The shortfalls are slowing the recovery in some states hit hardest by the housing crash. In Florida, permits to build single-family homes this year are up 25% from last year but remain less than a quarter of the 2005 peak. In Tampa, crews that install drywall in new homes are especially scarce after many headed north when projects and wages plummeted in the recession, says Angela Phillian, owner of Angela Drywall. Walls can typically be installed in a house in a week, but it's now taking up to two weeks or more, she says, because she often has to wait at least several days for a crew to free up from another job.
She routinely contends with managers of rival companies who sidle up to a job site and poach her workers by offering them an extra dollar per drywall board, a tactic Phillian says she's forced to deploy as well. "We're in a labor crisis right now," she says.
Recently, she says, the builders that subcontract drywall services have agreed to pay more. That has allowed Phillian and her competitors to return their pay rates to pre-recession levels of $5 per board after they fell to less than half that. And it's helping Phillian gradually lure drywall crews back to Tampa from Northern states such as New York.
But it's squeezing Tampa builders such as John Fowke, who says he's been hit recently with a 10% increase in both labor and material costs, forcing him to raise the sales prices of his houses. He worries that home appraisers won't increase their valuations in a still-distressed market, preventing buyers from obtaining a loan.
In Arizona, which is also seeing a moderate turnaround after being battered by the housing crash, a labor shortage is exacerbated by the new law that lets police check people's immigration status. Most white laborers won't work in Arizona's brutal heat and many Hispanic construction workers have left the state because of the law, says Buddy Satterfield, president of Shea Homes in Scottsdale. He says he's tried to coax Hispanic workers from Texas, Colorado and New Mexico, but "those guys won't come to Phoenix."
Satterfield says he's building about 450 homes this year instead of the 750 he should be putting up based on demand. "It just takes so much effort," he says. "A trade (crew) doesn't show up because they're on another job site and we have to reschedule."
Although the housing bust wasn't nearly as severe in Texas, many construction workers left the industry to toil in the state's thriving oil and natural gas drilling fields for higher pay and greater stability. With limited crews putting up frames, Tilson Homes is building houses in six to eight months, two months longer than normal, says President Eddie Martin.
Commercial contractors are also struggling in some areas. Scott Norvell, head of Master Builders of Iowa, a trade group, worries there won't be enough workers in the state to handle billions of dollars in projects over the next few years to rebuild structures damaged by the 2011 floods.
Redstone Painting & Finishes, which is turning a historical 12-story building in Des Moines into a complex of offices, stores and condos, has been unable to add 14 workers to the 41 now on site, says company President Rob Knudsen. Instead, he says, existing employees are running up overtime, increasing his costs by 50% and reducing his profits by 25%.
"That's less money for more new equipment and increasing marketing and growing," Knudsen says, adding that he could double his revenue if he could find enough workers.
At North Carolina's Wayne Bros., which builds concrete walls and foundations for power plants and other commercial buildings, positions stay open three to six months, forcing the company to accept about 25% fewer jobs than it can handle, Chicas says. The contractor offers apprenticeships, but it takes one to three years for an apprentice to be productive, he says.
Such training is less prevalent than it used to be. Many commercial contractors offer apprenticeships and courses in-house or through local trade groups and unions, says Don Whyte, president of the National Center for Construction Education and Research. But a declining number of residential builders provides training, says John Courson, head of the Home Builders Institute. There were 5,453 construction apprenticeship programs overseen by the federal government in fiscal 2012, down from 6,076 in fiscal 2007, Labor Department figures show. Home builders "want workers that can hit the job site and go to work the first day," Courson says.
Meanwhile, some laid-off construction workers are trickling back as activity picks up, but others are entrenched in more stable fields. James Bewley of Omaha, a 36-year mason who was laid off in 2008, worked sporadically at reduced hours for several years. After his income dwindled so dramatically that he almost lost his house, he took a $4,000, four-week class at JTL Truck Driver Training in August 2011. "It was time to do something else," says Bewley, 52, adding that driving was physically easier but far more stressful than construction work. His first job kept him away from home 11 days at a time and paid half the roughly $50,000 salary he earned in construction. But he recently took a $34,000 job with a petroleum company that lets him make deliveries to area stores and sleep at home nightly. His company also offers a 401(k) plan and paid holidays and vacation — perks he never had in construction.
He sometimes misses his old job, noting, "You take pride in your work." But, he adds, "Then I remember how hard it was." "I can always go back to bricklaying," he says, but "I'm not going to if I don't have to. I could see (a major downturn) happening again." Others are open to returning to construction. Steelworker Ryan Espinoza of Reno saw his work slow down in 2008, forcing him to eventually take a job as a bill collector for a cable company and file for bankruptcy. This year, he took a 16-week class to learn to operate computer-controlled factory machines.
He quickly found work at an area factory earning $12 an hour, far below his $30-an-hour construction salary. He also misses working outside and at an endless variety of locations. Espinoza says he'll stay in manufacturing if he can learn to program factory machines, allowing him to approach his former pay.
"Otherwise, if construction comes back and shows it's steady, I would probably go back," he says.
