Construction will face a labor gap of 430K workers this year, ABC says

This story is part of Construction Dive's ongoing 'Roadblocks to Recovery' series of articles looking at the COVID-19 pandemic's effect on the construction industry and how an expected rebound in construction work later this year could be slowed by a variety of forces. Click here for other articles in the series and check back for more throughout the year.

Dive Brief:

Construction companies will need to hire at least 430,000 more workers this year than they employed in 2020, according to an average-growth analysis of U.S. Bureau of Labor Statistics data released this week by Associated Builders and Contractors.
Under a higher-growth rate scenario, the number of additional construction workers needed in 2021 could swell to nearly 1 million, ABC said. Last year the industry employed 7.8 million workers.
In addition, construction spending is likely to reach $1.45 trillion in 2021, up 1.3% from 2020, according to the release. The analysis also revealed that every $1 billion in construction spending generates an average of at least 5,700 construction jobs.

Dive Insight:

The ABC study backs up recent findings from other groups that show a labor crunch is in the making for construction this year. For instance, the 2020 Marcum JOLTS Analysis of construction data released earlier this month found that despite coronavirus-induced layoffs, construction employees are becoming harder to find and more expensive.

As the industry bounces back from pandemic-related downturns, contractors in some regions are struggling to find labor and wages have risen to record levels, the Marcum report said. In January 2021, average hourly earnings of construction employees reached their highest level ever, $32.11, and average weekly hours worked rose to their highest level since 2019's third quarter.

"When the pandemic began, some thought (and hoped) that the massive job losses observed in March and April would mitigate the skilled labor shortages that have frustrated construction firms for years," wrote Anirban Basu, Marcum's chief construction economist and author of the report. "That simply hasn't happened to any meaningful degree."

The ABC analysis also found that last year's nominal construction spending rose 4.8% as employment fell 6.3%. This was due to several factors, ABC said:

A spike in building materials and labor costs, attributed to shortages and supply chain disruptions.
A change in the mix of construction work which included more residential construction, a segment that saw some of the largest cost increases due to an uptick in lumber prices.
A labor supply reduction that encouraged faster than usual adoption of labor-saving technology by builders.
Improvement in the scheduling and logistics of building materials delivery.
Increased use of prefabrication and modularization.
A decrease in the number of smaller, less efficient construction companies as they went out of business.