Labor and subcontractor shortages have become even more widespread in July of 2017 than they were in June of 2016, according to single-family builders responding to special questions on the NAHB/Wells Fargo Housing Market Index (HMI) survey.
The July 2017 HMI survey asked builders about shortages in 15 specific occupations that were either recommended by Home Builders Institute (NAHB’s workforce development arm) or that NAHB found to be particularly significant when tabulating Bureau of Labor Statistics data for a recent article on Young Adults & the Construction Trades. Shortages (either serious or some) were at least fairly widespread for each of the 15 occupations, ranging from a low of 43 percent for building maintenance managers to a high of around 75 percent for the three categories of carpenters (rough, finished and framing).
In addition to labor that single-family builders employ directly, the HMI survey asked about shortages of subcontractors, which have become even more widespread lately. In the July 2017 survey, the incidence of shortages was higher for subcontractors than for labor directly employed by builders in each of the 15 occupations. At the top of the chart, for example, 85 percent of builders reported a shortage of framing subcontractors, compared to “only” 77 percent who reported a shortage of framers directly employed.
Historically, this has not always been true. An average shortage calculated across the 9 trades that NAHB has covered in a consistent way since 1996 shows that labor and subcontractor shortages used to track each other fairly closely. Since 2013, however, a persistent gap has opened, with the 9-trade shortage for subcontractors running 5 to 7 percentage points higher.
A possible reason is that some workers who were laid off and started their own trade contracting businesses during the housing downturn have returned to working for larger companies. This would improve the availability of workers directly employed by builders slightly, while shrinking the pool of firms available for subcontracting.
The 9-trade average shortage for labor has increased from a low of 21 percent in 2012 to 56 percent in 2016, and now 63 percent in 2017. And this trend has been very consistent. For each of the construction occupations covered in both years, the shortage percentage, whether for labor directly employed or subcontractors, increased between 2016 and 2017—with the sole exception of excavator subcontractors, for which the percentage remained roughly the same.
The 9-trade average labor shortage is now at its highest since 2000 (which marked the end of an extended period of strong GDP growth that tightened many labor markets and drove the overall unemployment rate down to 4.0 percent). The current labor shortage seems especially severe relative to housing starts, which have only partially recovered from their post-2006 decline.
Again, the historical pattern has been quite consistent across construction occupations. Shortages for most of the occupations are more widespread now than at any time since 2000. The exceptions are shortages that are at their all-time worst since NAHB first started asking the questions in 1996. For directly employed labor, the shortage of painters is now at its worst ever. For subcontractors, in addition to painters, shortages of framing crews and electricians are also at their all-time worst. For excavator subcontractors, the 2016 and 2017 shortages are essentially tied for worst all time.
Additional details, including changes in labor and subcontracting costs reported by builders and the complete history of responses to each question in the NAHB survey, are available in the full report.
The NAHB survey results are consistent with the latest numbers in the Job Opening and Labor Turnover Survey (JOLTS) release from the Bureau of Labor Statistics. After a decline in May that now appears anomalous, the latest JOLTS shows the number of unfilled jobs in the construction industry rising significantly in June.