2017 High Expectations

If you’ve had a chance to look at the State of the Industry Report in the January issue, you’ll see that even though many people feel very uncertain about the future under our soon to be new president, the experts we talked to are predicting a fairly positive year for 2017.

This optimism is also supported by many construction firms, as 73 percent report that they plan to expand their payrolls this year. According to a recent survey, ” Expecting a Post-Election Bump: The 2017 Construction Industry Hiring and Business Outlook,” by the Associated General Contractors of America (AGC) and Sage Construction and Real Estate, contractors expect private and public sector demand to grow in all market segments. However, many firms report they are still worried about the availability of qualified workers and rising health and regulatory costs.

Increased Hiring

Although a high percentage of firms say they will increase their headcount this year, association officials note this will only lead to modest increases in the overall sizes of firms. Sixty-six percent of firms expect hiring to increase their total headcount between 1 and 25 percent, while only 6 percent expect their headcount to be expanded by more than 25 percent.

One reason for the slight increases expected in headcounts is that many firms are still having a hard time finding enough qualified workers to hire. According to the report, 73 percent of firms say they are having a hard time finding qualified workers, while 76 percent of respondents predict labor conditions to remain tight, if not get worse, over the next 12 months.

However, most firms say they are increasing pay and/or benefits to retain or recruit qualified staff to deal with the worker shortages, with 52 percent increasing base pay rates, 35 percent are providing incentives and/or bonuses, and 28 percent have increased contributions to employee benefits. Additionally, 52 percent report they plan to increase their investments in training and development this year.

Health Care

With Trump’s promise to dismantle the Affordable Care Act, otherwise known as Obamacare, many constructors are worried about the increase costs in health care and regulatory compliance. Of the firms that responded, 84 percent said the cost of providing health care for employees increased in 2016, with 82 percent worried those costs will continue to increase in 2017. And, growth in federal regulations worries approximately 41 percent of firms.

Market Segments

According to the report, most contractors expect the overall construction market to expand or remain roughly the same this year as it did last year. Forty-six percent of respondents said they expect a higher dollar volume of projects this year, versus just 9 percent who expect a lower volume, for a net positive reading of approximately 36 percent. The remaining 45 percent expect volumes to more or less stay the same.

Overall, contractors had a positive outlook for all 13 market segments included, with respondents being most optimistic on the outlook for hospital and retail, warehouse and lodging (23 percent net positive for both). They were also optimistic on the outlook for private office (20 percent net positive), manufacturing (18 percent), highway (15 percent) and public building construction (15 percent), higher education construction (14 percent), K-12 school construction (14 percent) and water and sewer construction (14 percent).

Multifamily residential was the only market segment where contractors are less optimistic than they were last year, with an 11 percent net positive compared to 14 percent last year. However, association officials note that most respondents completed the survey in the days and weeks following the elections, and may have based some of their optimism on recent stock market value growth and the fact that Trump has repeatedly promised to make investments in infrastructure.

While overall economic conditions seem to show that 2017 will be positive for the construction industry, association officials note that it appears survey responses are based in high expectations for the incoming administration and on Trump’s commitment to investing in infrastructure, improving federal health care laws and reducing burdens. “If plans to invest in infrastructure, reform healthcare laws and roll back regulations are delayed, many contractors will likely scale back their plans to expand headcounts,” said Stephen E. Sandherr, AGC CEO.

As we head further into 2017, we’d love to hear how you’re feeling. Do you predict increased demand for projects, leading to having to hire more people? How are you dealing with finding qualified workers? Do health care costs create headaches in keeping a business growing and profitable in this economy? Drop us a note in the comments and tell us your predictions for 2017.