A new national survey of contracting firms reveals that 71% say they plan to expand their payrolls in 2016. That includes 88% of commercial contractors in Utah, with 71% of responding firms expecting to increase their headcount by as much as 25%.

In Colorado, 81% of surveyed firms say they will hire up to 25% more people in the coming year, with 29% expecting to add more than 25% to their workforce.
The survey results were recently released by the Associated General Contractors of America and Sage Construction and Real Estate. The survey, conducted as part of “The Challenges Facing a Growing Industry: The 2016 Construction Industry Hiring and Business Outlook,” indicates that AGC-member contractors foresee a positive year despite tight labor conditions, regulatory burdens and IT security challenges.

“The construction industry will continue to recover in 2016, as many firms add to their headcount amid growing demand in a range of private- and public-sector markets,” said Stephen E. Sandherr, the association’s chief executive officer. “The industry also faces a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery.”

Nationally, 63% of firms report that their planned hiring will increase total headcount between 1% and 25% while 8% report they will expand their headcount by more than 25% this year.

Among the 30 states with large-enough survey sample sizes, 95% of firms in Kansas plan to expand their payrolls in 2016, more than in any other state. Meanwhile, 25% of firms in Pennsylvania report they plan to reduce headcount this year, more than in any other state.

Market Sectors Up

Contractors expect a mix of private- and public-sector market segments will drive demand for construction in 2016. As measured by the net positive reading—the percentage of respondents who expect a market segment to expand versus the percentage who expect it to contract—respondents are most optimistic about the outlook for retail, warehouse and lodging (21% net positive).

Respondents were also positive about the outlook for hospital (19% net positive), private office (19%), multifamily residential (14%) and higher education (13%) construction. 

And they are optimistic about the prospects for K-12 school (12%) and public building (12%) construction, particularly in contrast to last year when contractors were generally pessimistic about all public construction market segments.   

Contractors are less optimistic about other segments, including manufacturing (7% net positive), other transportation (3%), power (1%) and direct federal (-1%) construction market segments. Yet AGC says it is important to note that this year’s outlook survey was completed before enactment of federal legislation to increase funding for highways, transit and direct federal agency spending, and to extend the expiration date for wind, solar and other tax provisions helpful to construction, association officials noted.

Labor Concerns Persist

Construction firms continue to cope with shortages of available workers.  Seventy percent of firms report they are having a hard time finding either salaried or craft professionals. And 69% of respondents predict that labor conditions will remain tight, or get worse, during the next 12 months.

Firms are responding to worker shortages by increasing pay and/or benefits. Forty-nine percent of respondents report they have increased base pay rates, 30% report they are providing incentives and/or bonuses and 23% report they have increased their contributions to employee benefits to retain or recruit workers. And nearly half of firms report they plan to increase their investments in training and development compared to 2015.

“What is particularly striking about the findings on worker shortages is that they are consistent with the responses from last year’s outlook,” said Ken Simonson, the association’s chief economist. “In other words, after a year of raising pay and increasing benefits, contractors remain as worried about the lack of qualified workers as they were at the beginning of 2015.”

Health Care Costs

In addition to coping with worker shortages, contractors are also worried about the continued increase in health care costs. Seventy-nine percent of firms report the cost of providing health care for their employees increased in 2015 while another 81% expect their health care costs will increase in 2016.

Even as firms spend more on health care coverage, they are prepared to increase investments in information technology. According to the AGC outlook, 42% of firms report they invested at least 1% of their revenue in IT last year, up from 32% in surveys that Sage conducted over the past two years.

Contractors are also becoming increasingly savvy with their IT investments. For example, 42% report they already have formal IT plans in place while an additional 11% will put such plans in place in 2016. Likewise, 59% of firms report they use, or plan to use, cloud-based software.

Most firms are also using technology to collaborate on construction projects, with 71% using file-sharing sites to share information with owners, subcontractors and other project partners and 40% using more sophisticated online collaboration tools.

As technology and the threat of cybercrime becomes more prevalent, many firms report they are having to take added steps to protect their IT systems. For example, 75% report they have an overall IT security plan and 46% have a security policy in place for mobile devices.

“Technology is making it easier for firms to operate and succeed in today’s competitive marketplace,” said Jon Witty, vice president and general manager for Sage Construction and Real Estate, North America. “We are seeing continued growth in the adoption of mobile technology and collaboration software and a continued move to the cloud, all done with an increasing focus on security.”

Beyond labor and IT challenges, contractors must also cope with new regulatory burdens. Thirty-nine percent of contractors report they are worried about the continued expansion of federal regulations while 34% report they are worried about the growth in state and local red tape, association officials noted.

The AGC outlook was based on survey results from more than 1,500 construction firms from all 50 states and the District of Columbia.
Varying numbers responded to each question. Contractors of every size answered over 30 questions about hiring, workforce, business and information technology plans.