b'Construction must attract 439,000 new workers in 2025While the consensus forecast has construction spending to meet demandincreasing by less than 3% in 2025, that same forecast has The construction industry will need to attract an estimatedunderestimated growth by a significant margin during each 439,000 net new workers in 2025 to meet anticipated de- of the past three years, Basu said. If inflation dissipates in mand for construction services, according to a proprietarycoming months, borrowing costs will subside and construc-model developed by Associated Builders and Contractors.tion volumes will increase. Faster-than-expected immigra-In 2026, the industry will need to bring in 499,000 newtion over the past few years has also bolstered labor supply, workers as spending ramps up in response to expectedand potential changes to immigration policy will likely con-lower interest rates.strain worker availability.ABCs proprietary model uses the historical relationship between inflation-adjusted construction spending growthsourced from the U.S. Census Bureaus Con-struction Put in Place Surveyand payroll construction(continued from page 3 Presidents Message) employmentsourced from the U.S. Bureau of Labor Sta-tisticsto convert anticipated increases in constructionI had written out on dry erase board (easily could be outlays into demand for construction workers at a rate ofchanged if the team disagreed, they liked this), this was about 3,550 jobs per billion dollars of additional spending.our schedule and our goals, the whole team discussed The model also incorporates the current level of job open- every area and set a timeline. At the end of this job we ings, unemployment and projected industry retirementswere 100 days ahead of schedule. So now, they had a and exits into its calculations.sense of success because they had the opportunity to weigh in on this every day (VERY POWERFUL). While the construction workforce has become younger and more plentiful in recent years, the industry still must attract 439,000 new workers in 2025 to balance demandThe process we have implemented with projectand supply, said ABC Chief Economist Anirban Basu. Ifmanagers is the same. We get a bid invite, then we dis-it fails to do so, industrywide labor cost escalation willcuss as a team if we all are unanimous on bidding that accelerate, exacerbating already high construction costsjob. If we are awarded that job, we then decide who is and reducing the volume of work that is financially feasi- going to manage that job. We have to discuss who the ble. Average hourly earnings throughout the industry arebest crew is for that job (bythe way, if anything is not up 4.4% over the past 12 months, significantly outpacing earnings growth across all industries.unanimous, we will then take a vote). We schedule manpower weekly together with everyones input. At This represents improved labor availability relative tothe end of each quarter, we go over our profit/ loss re-recent years, Basu continued. The improvement can beport and again at the end of each year. If there is any-traced to two primary factors. First, construction spendingthing we can improve on, we discuss at this time. is expected to grow at its slowest pace in years throughout 2025, especially in interest rate-sensitive segments like homebuilding. Interest rates will remain elevated in 2025Looks like my newsletter has gone over the amount of before likely beginning to dip next year. Second, the in- words that I normally use, I just wanted to see if any-dustrywide workforce has become significantly youngerone needed this management tool. Anyone in the MI-over the past several quarters, with the median construc- CA organization should feel free to call me anytime if tion worker now younger than 42 for the first time sincethere are questions they have, I would be most happy 2011. As a result, the pace of retirements is expected toto answer them. In the last newsletter I promised we slow this year.would see how much closer we were to reaching goals Basu said even with that improvement, contractors willand dreams. I havent quite decided how to word this continue to struggle to fill open positions.yet for a group (I am working on it though).This will be especially true in areas where manufacturingLastly I want to leave you all with this, I hope every-and data center megaprojects are underway, Basu said.one is having an outstanding year and that all their More than $1 in every $5 spent on nonresidential con-struction currently goes toward manufacturing projects,family is well, please let the group know if there are and those projects are absorbing a significant share of theany prayers that you need (PRAYER IS MORElabor force in their respective regions.POWERFUL IN A GROUP). Basu said certain factors could render the model as overly conservative, and worker shortages this year could be more severe than expected. 23'