NAHB surveys of the residential construction industry reveal that the cost and availability of workers will be the top business challenge of 2016, as it was last year. And new labor market data are consistent with these results.
According to the NAHB survey, 76% of builders expect labor cost and availability to be a problem in 2016. This concern over labor has continued to grow in recent years, as 68% of builders in 2015 reported the same expectation, increasing 3% from the previous year.
Consistent with the survey, the count of unfilled construction sector jobs increased noticeably in December, rising to 207,000 from 138,000 in November on a seasonally adjusted basis. The rate of open jobs in the construction sector has been on an upward trend in recent years as demand for new workers has outpaced supply.
These sector developments are occurring while overall unemployment has remained low (4.9% per the Bureau of Labor Statistics in January), though the number of unfilled jobs for the entire economy is rising as well. While weaknesses in other sectors of the economy – particularly the energy sector — may help builders in certain markets, overall tight labor conditions mean construction firms should prepare to see cost increases.
Despite generally positive labor market conditions, the overall economy is underperforming as we enter the halfway point of the first quarter. The first estimate of GDP growth for the last quarter of 2015 was only 0.7%, after growth of 3.9% and 2% for the second and third quarters, respectively.