Gilbane's Spring 2014 Construction Economics Report Confirms Industry Job Growth Improvement

PROVIDENCE, R.I. — Gilbane Building Company announced the spring 2014 edition of its in-house economics report, Construction Economics—Market Conditions in Construction, confirms that while construction jobs grew less than anticipated in 2013, they grew by 156,000 last year with hours worked increasing by 3 percent—the equivalent of an additional 150,000 jobs. Year to date, the industry has gained 88,000 jobs in 2014 with job growth exceeding 25,000 per month over the last three months.

“I am pleased to see that job growth has improved industrywide, however, the construction workforce is still near a 15-year low, about 20 percent below the 2007 peak,” said Ed Zarenski, a Gilbane estimating executive with more than 40 years in the construction business. “As the workload increases in the next few years, the industry will need a large pool of skilled workers to expand in tandem so not to have a detrimental effect on cost, productivity and the ability to readily increase construction volume.”

According to the report, construction volume is currently 23 percent below peak inflation adjusted spending, which was almost constant from 2000 through 2006. At average peak growth rates of 8 percent per year and factoring out inflation to get real volume growth, it will take eight more years to regain previous peak volume levels.

Other report highlights include :

• Whole building costs to rise and remain above material/labor inflation as work volume continues to increase.
• Supported by overall positive growth trends for year 2014, margins and overall escalation will climb more rapidly than we"ve seen in six years.
• Construction spending for 2014 will finish the year 6.6 percent higher than 2013. Nonresidential buildings will contribute substantially to the growth.
• 65 percent of builders surveyed expect the cost of labor in 2014 to be a significant challenge.
• The construction workforce and hours worked is still 22 percent below the 2006 peak. At average peak growth rates, it will take a minimum of five more years to return to previous peak levels.
• Construction spending for nonresidential buildings was flat in 2013. However, construction inflation for nonresidential buildings was about 3-4 percent. Therefore, real volume for nonresidential buildings actually declined by about 3-4 percent in 2013.
• As spending continues to increase, contractors gain more ability to pass along costs and increase margins. Contractor margins increased in 2012 but growth slowed last year. Expect increases in new construction volume in 2014 to support further increases to margins.

This free report, Gilbane Market Construction Economics and the executive summary are available for download at http://info.gilbaneco.com/spring-2014-gilbane-building-construction-economics-report—-market-conditions-in-construction.