Dive Brief:

• Contractors are slightly less optimistic this year than at the start of 2015, but 71% still plan to increase their headcounts in 2016, according to a survey released Tuesday by the Associated General Contractors of America and Sage Construction and Real Estate. Only 6% plan to reduce the number of people in their firms.
• The survey, based on responses from more than 1,500 firms of varying sizes between mid-November and mid-December, found contractors are optimistic about both private and public sectors, especially retail, warehouse and lodging; hospital; private office; multifamily residential; and higher education. Respondents said they were the least optimistic about water and sewer; manufacturing; highway; other transportation, including rail, transit and airports; and power.
• Responding firms reported the skilled labor shortage is the most significant factor affecting their hiring plans. 70% reported having difficulty finding qualified salaried and craft workers. And, perhaps even more concerning, 69% said they believe the current labor pool conditions will remain as tight or get even worse in the next year.

Dive Insight:

At the start of 2015, 80% of construction firms said they planned to increase their company's headcount. The dip this year is due largely to the labor shortage, increased competition, additional government regulations, and higher healthcare costs, according to the AGC.

"What is particularly striking about the findings on worker shortages is that they are consistent with the responses from last year’s Outlook," AGC Chief Economist Ken Simonson said in a release. "In other words, after a year of raising pay and increasing benefits, contractors remain as worried about the lack of qualified workers as they were at the beginning of 2015."

As a result of the ongoing labor shortage, firms reported a variety of efforts to attract and retain employees. 49% said they have raised base pay rates, 30% have provided incentives or bonuses, and 23% have bumped up their contributions to employee benefits. For 2016, 46% of companies reported they plan to raise their investment in training and development as compared with last year. 

"The construction industry will continue to recover in 2016 as many firms add to their headcount amid growing demand in a range of private and public sector markets," AGC CEO Stephen E. Sandherr said during a media call. "The industry also faces a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery."

The AGC survey also found that construction companies are increasing their investment in information technology, as 42% reported they invested at least 1% of total revenue in IT in 2015. That figure is 10% higher than during the previous two years.

"Technology is making it easier for firms to operate and succeed in today’s competitive marketplace," Jon Witty, vice president and general manager for Sage Construction and Real Estate, North America, said in a release. "We are seeing continued growth in the adoption of mobile technology and collaboration software and a continued move to the cloud, all done with an increasing focus on security."

That heightened focus on technology is no surprise, as 2015 saw major technological advancements in the construction industry. From building information modeling to drones to mobile apps, companies of all sizes are implementing new technologies to improve building processes and communication between parties involved on a project.