For Skilled Craft Labor, Chicago is 'A Tale of Two Cities'

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Industrial Info Resource's (Sugar Land, Texas) most recent quarterly update to its "Illinois Zone 1 - Labor Supply, Demand & Wages" subscription service shows project spending gathering momentum over the next few years for the Greater Chicago area. However, because of the types of projects occurring, some skilled crafts will be in short supply, while others will show a surplus, with workers perhaps having to travel to nearby locations for work. This is not the full analysis and is only a summary of highlights. The Labor Forecast is a special 'risk assessment' tool to understand future dislocations in labor and wage pressures.

Project spending in the Greater Chicago area suffered several years of decline following the recession of 2008. Spending in 2009 fell below 2008 levels and continued falling each subsequent year through 2012, when it fell to about $4 billion, before gradually edging upward to reach approximately $5 billion this year. From 2010 and 2014, spending in Greater Chicago grew at a compound annual growth rate (CAGR) of 0.5% with a labor hour growth rate of 1.0%. However, new project spending in the area is set to take off.

Although Industrial Info is expecting a slight dip in spending in 2016, the area's peak spending lies ahead and is forecast to reach over $6 billion per year in 2017, 2018 and 2019, bringing CAGR of 6.8% over the next four years and an accompanying increase in labor demand. However, the type of project activity will have different effects on different skilled crafts, and we are expecting deficits in certain skills, while others will be in surplus.

Much of the influx of project activity is coming from the Industrial Manufacturing Industry. The Chicago area is a large hub for distribution centers, which drives rail line expansions, intermodal yards, and new distribution centers. Companies such as Bridge Development Partners (Chicago), CoreCentric Solutions (Glendale Heights, Illinois) and Ikea North America Services LLC (Conshohocken, Pennsylvania) are planning large distribution centers in the area.

In addition, wind energy development remains quite strong. Industrial Info has tracked more than $1.2 billion in spending at four sites that now generate more than 600 megawatts (MW) of power. Wind projects continue being developed in the region. Mainstream Renewable Power (Dublin, Ireland) is planning a $400 million, 200-MW development in Poplar Grove; BHE Renewables is planning a $345 million wind energy site; and EDF Renewable Energy (San Diego, California) is planning a $330 million, 164-MW development.

Shortages of Certain Skilled Crafts, Ample Supply for Others
With this increased spending activity, Industrial Info is expecting to see noticeable regional labor shortages in three skilled crafts: millwrights, crane and heavy equipment operators, and boilermakers. Instrumentation technicians will also be in tight supply. Because of this, Industrial Info forecasts that these skilled crafts will experience higher compensation and per diem costs, as well as a higher number of travelers, in the Chicago area in the coming years, particularly from 2018 through 2020.

What makes the situation "a tale of two cities" is that IIR forecasts that carpenters, plumbers/pipefitters, and electricians will have an ample supply of journeymen throughout the Chicago Metropolitan area, which will provide a good location to draw journeymen for surrounding areas with high demand in the next years in areas like Duluth, Toledo and Detroit, which will have a shortfall in some of these crafts.

Industrial Info's July Labor & Productivity Survey was completed by 576 owners and contractors. Results indicated that it was thought that the greatest wage increases would be seen in the Chemicals and Industrial Manufacturing sectors, both of which are strong in Chicago. In addition, it was also noted that the adjacent Midwest market region was expecting the greatest wage pressure due to high demand.

If you would like to participate in Industrial Info's Labor & Productivity and receive a complimentary copy of the survey results, please visit the following link:
https://www.industrialinfo.com/analytics_forecasting/LaborDemandResults/survey.jsp.

For a demonstration of Industrial Info's Labor Analysis and Forecast Tool, which provides valuable information for risk assessment, operations and procurement, estimating requirements, and much more, contact Tony Salemme at tsalemme@industrialinfo.com.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten 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.