Total is Highest since 2007; Latest Increases Suggest Contractors Will Have Plenty of Work in 2016 But Concerns Escalate Regarding Availability of Sufficient Skilled Workers for Existing and Future Projects

Dec 1, 2015 -- Construction spending in October reached the highest level in nearly eight years with growth in all major categories, according to an analysis by the Associated General Contractors of America. Association officials cautioned however that demand for construction appears to be growing at a faster rate than the supply of qualified workers available to fill positions at firms.

"The October data were positive across the board, with robust growth for the month and year in residential, private nonresidential and public construction," said Ken Simonson, the association's chief economist. "The pause that had appeared in private and public nonresidential spending for several months seems to have ended."

Construction spending in October totaled $1.107 trillion at a seasonally adjusted annual rate, 1.0 percent higher than the September total and 13.0 percent higher than in October 2014, Simonson said. He noted that the total was the highest since December 2007.

Private residential spending increased 1.0 percent for the month and 16.6 percent over 12 months. Simonson noted that demand for multifamily residential construction grew at a particularly robust rate, 1.4 percent for the month and 27.9 percent year-over-year, while single-family spending rose 1.6 percent and 11.4 percent, respectively.

Private nonresidential construction spending gained 0.6 percent for the month and 15.3 percent over 12 months. Simonson observed that there were year-over-year increases in every private nonresidential category except "commercial" (retail, warehouse and farm) construction. The largest category, manufacturing construction, soared 3.0 percent and 40.5 percent, respectively.

Public construction spending rose 1.4 percent from a month before and 6.1 percent from 12 months earlier. Of the two biggest public categories, highway and street construction increased 1.1 percent and 6.0 percent, respectively, while spending educational facilities was flat for the month and up 8.4 percent for the year.

"The breadth of the expansion and the large number of categories with double-digit increases suggests that construction will continue growing well into 2016," Simonson commented. "My only concern is whether contractors will be able to find enough qualified workers to undertake all of the projects."

Association officials cautioned that as construction demand continues to expand, many firms are likely to have an even harder time finding enough qualified workers to fill available positions. Indeed, 78 percent of firms reported they expected workforce shortages to remain severe or get even worse during the coming year as part of a workforce survey the association released in September.

"We are reaching the point where demand for construction services is going to outstrip the supply of qualified and available workers," said Stephen E. Sandherr, the association's chief executive officer. "Once that happens, firms are going to bid on fewer projects, slow their schedules and worker shortages will bring more pressure on contractors to adjust their prices to meet the challenge of finding qualified craft professionals to perform the work."

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