Builders See Shortages of Labor and—Especially—Subcontractors

Data from a June 2014 NAHB survey show that shortages of labor and subcontractors have become substantially more widespread since 2013.   Shortages are particularly acute for workers with basic skills like carpentry, who are needed in significant numbers during the construction of any home.

Labor Trades ChartThe incidence of reported shortages is also surprisingly high relative to the current state of new home construction, which has only very partially recovered from its 2008 downturn.   Averaged across 9 key trades that have been consistently covered in NAHB surveys, 46 percent of builders reported a shortage in 2014. This is the highest the 9-trade shortage has been since 2000—slightly higher even than at the peak of the boom in 2004 and 2005, when the U.S. was averaging around 2 million housing starts a year, compared to current rates that have mostly remained under 1 million.

History ChartIn the late 1990s, reported shortages were more widespread than they are now,  but many things were in different in the late 1990s. In particular, GDP growth was consistently above 4 percent during that period, which drove the unemployment rate down to 4.0 percent.

The June 2014 NAHB survey data also show more builders reporting a shortage of subcontractors than of workers they employ directly. Partly as a result, costs of subcontractors are rising faster for builders than costs of directly-employed workers.

On average, builders said their direct labor costs on the same house had increased by 2.9 percent, while subcontractor costs increased 3.8 percent. Both numbers were up sharply from March of last year (the first time this particular question was included in the survey).

Cost Chart

One implication is that any reporting of construction labor statistics that ignores the effects of subcontracting is likely to understate the magnitude and impact of the shortages.  For a description of the survey questionnaire and many other details, the full study is available online.

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