Contractors Report Optimism About 2014

“[This year] should be the best year for the contracting industry since 2006,” says Ken Simonson, the Associated General Contractors of America’s (AGC) chief economist.

Contractors haven’t been this optimistic about the outlook for the commercial construction market since the start of the recession roughly seven years ago, according to a report released this week. The 2014 Construction Industry Hiring and Business Outlook report by the AGC painted the rosiest picture for the industry in years. The report, which was based on a survey of more than 800 AGC members, forecasted industry demand in 2014 to grow or remain stable in virtually every market segment, prompting additional hiring by a majority of construction firms with few companies planning future layoffs. Nearly 75 percent of those surveyed expect to purchase new equipment in 2014, while 86 percent said they planned on leasing new equipment.

“Contractors are more optimistic about 2014 than they have been in a long time,” says Stephen Sandherr, the AGC’s CEO. “While the industry has a long way to go before it returns to the employment and activity levels it experienced in the middle of the last decade, conditions are heading in the right direction.”

Sandherr called the industry’s recovery “moderate and more even and slow” than most would have liked, but also cautioned against the new set of challenges that will accompany the expected growth.

Contractors surveyed say they expect to pay more in 2014 for materials and supplies, while health care costs continue to rise for every firm. Nearly two-thirds of survey respondents indicated that they are already having a difficult time finding qualified workers to fill key positions and that they expect workforce conditions to remain tough or tougher over the next year. Many firms also expect their operations to be negatively affected by government regulations and stiffer competition for jobs.

But the report will likely come as welcome news to an industry that was especially ravaged by the economic downturn and still short the nearly two million people employed by the industry during its peak in 2006.

Demand is expected to increase in virtually every market segment, but the plurality of contractors project certain key private sector market segments, such as manufacturing, retail, warehouse, lodging, hospital, higher education and private office, to fare especially well.

AGC officials have long cited the boom in natural gas and oil industries for the large uptick in commercial construction in states such as Louisiana, Texas and North Dakota, but say added demand can now even be seen in Florida, which had ranked as among the hardest-hit states following the collapse of the real estate market.

The expansion of the Panama Canal will just mean added opportunities for new building and warehouse construction for areas with deep sea ports, while easier access to credit has also helped spur the industry’s comeback, Simonson says.

Many firms say they plan to begin hiring again in 2014, while relatively few intend to lay off workers. Forty-one percent of the companies surveyed that did not change staff levels last year say they plan on expanding their payrolls this year, while only two percent of firms reported that they plan on layoffs. Unlike the numerous cases of wholesale layoffs in prior years, the firms who say they are likely to cut staff in 2014 expect to make just modest changes to their workforce.

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