AGC Survey: U.S. Labor Shortage Impacts Wide Swath of Construction Contractors

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Researched by Industrial Info Resources (Sugar Land, Texas)--Much attention has been focused on the growing shortage of workers needed for construction projects that stem from the U.S. shale boom, but those aren't the only projects that are hurting for qualified people. The Associated General Contractors of America (AGC) recently released the results of a survey indicating most of the construction fields across the country are having a hard time finding enough craft workers and professionals.

Industrial Info is tracking more than 15,000 active U.S. projects worth $1.5 trillion. Power projects are highest in value, with 3,000 projects worth $559 billion. Oil and gas pipelines are second, with 746 projects worth $84 billion, and third place goes to the Industrial Manufacturing Industry, with 2,361 projects valued at $2.3 billion. In 2015, a total of 6,373 U.S. projects worth nearly $386 billion are scheduled for kickoff.

According to the AGC, 83% of the construction firms that responded to the survey this summer said they were having difficulties finding enough qualified craft workers, such as carpenters, equipment operators and laborers, while 61% said it's tough to find qualified construction professionals, including project supervisors, estimators and engineers.

The situation appears to have gotten worse. The AGC said a contractor survey last year showed that 74% of the construction firms were having a hard time finding enough qualified craft workers, and 53% were having a hard time filling professional positions.

More than 1,000 firms participated in the latest survey. They represent a range of construction, such as highways, public and retail buildings, office buildings, manufacturing plants and multi-family dwellings, according to the AGC.

Speaking at a press conference, AGC Chief Economist Ken Simonson said many construction workers left the industry for good during the lengthy recession. In addition, he said, the U.S. educational focus has moved away from teaching students career and technical skills.

The Southeast region appears to have the most pronounced labor shortage, where 86% of the contractors reported having a hard time finding qualified workers, compared with 67% in the Northeast, according to the survey results.

The results differ significantly from state to state. For example, 91% of those surveyed in Texas reported having a hard time finding enough workers, while 78% of those in Illinois reported likewise.

Simonson said the severity of the craft worker shortage appears to have a correlation with the quality of local training programs. Two-thirds of the survey respondents in the South said their "training pipeline" was poor, he said, while more than half of those from the Northeast said the training pipeline was average or above average.

The situation can be "pretty daunting" for states like Louisiana, which has seen a boom in pipeline, refinery and petrochemical construction jobs, Simonson said. All survey respondents in Louisiana reporting having a hard time filling craft and professional positions.

John Floren, the president and chief executive officer of Methanex (NASDAQ:MEOH) (Vancouver, Canada), said recently that projected costs for two projects at Geismar, Louisiana, rose by $300 million, largely as a result of labor costs and productivity issues.

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"If you were to go to a site like ours, you would see a labor force mainly made up 20- to 29-year-olds and then the bulk of the rest 45, 60 [years] and even older. There is nothing in the middle," Floren said during the Methanex third-quarter earnings conference call in October. Competition among contractors is particularly strong for pipefitters and welders in the area, which consequently boosts costs, he said.

Many industry observers say the labor shortage in U.S. Gulf Coast states will become more severe as projects ramp up in 2016 through 2017. For related information, see October 23, 2014, article - Gulf Coast Industrial Boom: High Expectations, but Will Labor Constrain It?.

Floren indicated he was more concerned by a decline in labor productivity. The United States "used to be the benchmark for productivity, but that is long gone. It is now [South] Korea," he said. Consequently, "I would not be wanting to spend millions of dollars [on projects] in the 2016-17 period in the U.S. Gulf."

Other companies with U.S. Gulf Coast projects have indicated they have yet to see as strong an impact from the labor situation. Executives with Valero (NYSE:VLO) (San Antonio, Texas) said during the company's earnings conference call that they've managed to keep ahead of the labor availability issue, but could see more challenges in the next few years.

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For related information, see November 13, 2014, article - Valero Trims Capital Spending to $2.9 Billion for 2014, $2.8 Billion for 2015.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.