Almost Three-Fourths of Construction Firms Plan to Expand Headcount in 2017

Seventy-three percent of construction firms plan to expand their payrolls in 2017 as contractors expect private and public sector demand to grow in all market segments, according to survey results recently released by the Associated General Contractors of America and Sage Construction and Real Estate. Despite the general optimism outlined in Expecting a Post-Election Bump: The 2017 Construction Industry Hiring and Business Outlook, many firms report they remain worried about the availability of qualified workers and rising health and regulatory costs.

Contractors had a positive outlook, on net, for all 13 market segments included in the survey. Respondents are most optimistic about the outlook for both the hospital and retail, warehouse and lodging markets (23 percent net positive for both). Respondents were also positive about the outlook for private office (20 percent net positive), manufacturing (18 percent), highway (15 percent) and public building construction (15 percent) construction. And they are optimistic about the prospects for higher education construction (14 percent), K-12 school construction (14 percent) construction and water and sewer construction (14 percent).

The only market segment where contractors are less optimistic this year than they were last year is the multifamily residential sector, where there is an 11 percent net positive for the year vs. a 14 percent net positive last year. It is important to note, however, that most respondents completed this survey in the days and weeks following the elections and may have based some of their optimism on the recent growth in stock market values and the fact the president has repeatedly promised to make new investments in infrastructure, association officials noted.

Association officials noted that 73 percent of firms say they will increase their headcount in 2017. That hiring will only lead to modest increases in the overall size of firms, however. More than 65 percent of firms report their planned hiring will increase total headcount between 1 and 25 percent while only 6 percent report they will expand their headcount by more than 25 percent this year.

Among the 28 states with large enough survey sample sizes, 94 percent of firms in Massachusetts plan to expand their payrolls in 2017, more than in any other state. Meanwhile, 45 percent of firms in Illinois report they plan to reduce headcount this year, more than in any other state. (Click here for state-by-state survey results.)

“Contractors remain quite concerned about labor shortages, tight margins and growing costs,” said Ken Simonson, the association’s chief economist. “In particular, as additional older workers reach retirement age, firms will struggle to find qualified workers to replace them.”

In addition to coping with worker shortages, contractors are also worried about the continued increase in healthcare and regulatory compliance costs. Eighty-four percent of firms report the cost of providing healthcare for their employees increased in 2016 while 82 percent expect their healthcare costs will increase in 2017. And 41 percent of firms report they are worried about the growth in federal regulations.

Association officials noted that overall economic conditions indicate 2017 should continue to be positive for the construction industry. But they added that it appears the Outlook responses are based as much in high expectations for the incoming administration and the president’s commitment to investing in infrastructure, improving federal healthcare laws and reducing regulatory burdens.

The Outlook was based on survey results from nearly 1,300 construction firms from 49 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 30 questions about their hiring, workforce, business and information technology plans. Click here for the survey results.