ABC: 2013 should be a decent year in construction growth, with residential housing setting the pace. Many nonresidential projects, however, will likely remain on hold due to uncertainties over the fiscal cliff, Middle East strife and the struggling economies in Spain and other parts of Europe. The reason? There’s a more significant risk when building a hotel, office building or shopping center than when constructing a single-family home. Hence, it requires more confidence in the future to go ahead with projects.
ET: Construction unemployment continues to outpace the national average. Do you see this gap closing in 2013? If so, do you see the biggest gains in the public or private sector, and why?
NAHB: Construction employment should begin to pick up as residential construction gains ground. The NAHB estimates that 1.5 construction jobs are added for every new single-family home built. Single-family production will increase in 2013 by 140,000 over the expected 2012 final total. At that level, there will be the need for at least 210,000 additional construction jobs.
But, construction jobs are not the only employment gains when housing production increases. The jobs to manufacture cabinets, appliances, carpets and all of the other building material components in a home are also generated with housing construction, but their counts show up in the manufacturing columns of government statistics. There will be another 210,000 “other” jobs that help support housing construction for a total addition of over 400,000 jobs just from the increase in production from 2012 to 2013.
IHS: Any closing of the gap will be minimal in 2013. While the country will not go over the fiscal cliff at the start of January, the uncertainty that the prospect has been creating will loom further into 2013 until the issue is resolved once and for all.
There will be a more significant closing of the construction unemployment gap in 2014 as the economy gathers steam. The gains will be larger in the private sector than in the public, as public funding is uncertain at best in the coming year. As residential construction gets back on its feet, this will be where construction employment lifts first.
ABC: The construction unemployment gap should close somewhat in 2013, in part due to an uptick in residential housing construction and the fact that many construction workers have already left the industry to find work elsewhere or have retired. The bigger concern down the road will be a labor shortage for construction jobs. Potential younger workers are not learning the necessary skills to keep up with an industry that is changing — with different materials being used, different technology and different equipment.
AGC: The unemployment rate for former construction workers has tumbled in the past two years, from 17.2% in September 2010, to 11.9% in September 2012. (Industry rates are not seasonally adjusted.) That means roughly half a million workers are no longer sitting at home waiting for a contractor to call them back.
Unfortunately, construction employment has not been rising. Instead, these experienced workers have been getting jobs in trucking, oil and gas fields, manufacturing or elsewhere. It may be hard for contractors to find the skilled workers they will need if project volumes do pick up in a year or two.
PCA: Employment opportunities in construction will improve as building in the housing sector picks up in 2013. Nonresidential construction, especially in the public sector, will not see the same gains.
Raw materials costs
ET: Contractors and builders often see the incongruity of a slowdown of projects and a rise in the cost of raw materials. What are major drivers for the cost of raw materials and how do you see these costs trending for 2013?
AGC: The most problematic cost for contractors in recent years has been diesel fuel. Diesel prices largely reflect global crude oil prices, but also demand for diesel from Europe and elsewhere. Anything from worries about the Middle East and a hurricane in the Gulf of Mexico to a refinery shutdown can send diesel prices soaring and leave contractors paying hefty fuel surcharges on thousands of deliveries and backhauls.
For items such as concrete, gypsum and lumber, construction is pretty much the only market, and prices reflect supply and demand within the industry. Concrete prices have been flat because of limited growth of construction. Wallboard and plywood prices have spiked this year as home and apartment construction have revved up.