While materials price escalation has grabbed most of the headlines, labor costs are also contributing to construction’s growing inflationary pressure. "The one thing that is not getting a lot of attention, but soon will be, is wage and salary pressure on contractors’ prices," says Julian Anderson, Phoenix-based partner at project cost consultant Rider Hunt Levett & Bailey. "As the economy picks up, there is going to be upward pressure on salaries of supervisors, cost engineers, schedulers and other professionals that are going to be passed along to owners."

Summary: Inflation Makes Its Move
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Construction's Labor Market

Total construction through the first four months of this year is running 9% ahead of last year’s strong market, according to McGraw-Hill Construction Dodge’s construction starts data. This has already caused a bounce in employment.

In May, total employment in the construction industry for both blue and white-collar workers hit a seasonally adjusted annual rate of 6.9 million, according to the U.S. Dept. of Commerce. This is 3% higher than a year ago and represents the industry’s highest-ever employment level. Hires in civil engineering, building and heavy construction and specialty contracting all made gains.

Construction’s unemployment rate fell from last year’s peak of 8.4% to 7.4% this year, according to Commerce’s May data. But the figure is still significantly higher than the 5% record low in May 2000.

Nationally, union wages, including fringe benefits, averaged $34.74 in April, according to data from 21 trades that are tracked by R.S. Means, Kingston, Mass. This is a 4.5% increase over a year ago. Means reports wages increasing 5.2%, to $34.71 an hour for bricklayers; 5.0%, to $33.62 for carpenters; and 4.7%, to $40.26 for structural steel workers.

Some of the strongest wage pressure is on the West Coast. The average union wage in California has increased 6.4% since last year, according to Sierra West Group, Sacramento, which tracks wages and fringes for nine different crafts.

The largest annual increases tracked by Sierra West are for carpenters, whose wages have increased 9.7%, to $38.17 per hour. Wages for bricklayers increased 8.1%, to $39.11, while ironworkers won a 6.0% increase that lifts their total hourly wage package to $42.08, says Sierra West. The firm compiles the Lee Saylor construction cost indexes.

ENR expects to see a bump in its 20-city average wage data during the next quarter when new wage settlements for seven cities are reported. In June, ENR’s average union wage for skilled workers, including fringes, was up 3.3% over a year ago.