Construction by the Numbers
Is the construction industry healthy, or is it on the downward slide?
Right now, some experts are predicting that the United States could be heading toward another housing bubble. At the end of last summer, mortgage interest rates spiked and cooled demand, but didn’t curb high home prices. The mismatch in supply, demand, and pricing has some prognosticators predicting another economic downturn.
If the housing bubble bursts and an economic lull arrives, construction will likely be one of the industries hit hardest. The construction job market declined significantly during the Great Recession, with Michigan hitting a low of 119,100 construction jobs in February 2010, based on Bureau of Labor Statistics (BLS) data. But that number has been increasing steadily ever since – even in the latter half of 2018 as chatter about a potentially unstable housing market started getting louder.
In December 2018, the BLS recorded 179,200 construction jobs in Michigan – up 6.9 percent from the same time in 2017. Some months last year saw even bigger gains: in July 2018, when the number of construction jobs in Michigan hit 177,400, that figure was up 8.7 percent year-over-year. No other industry the BLS tracks – including manufacturing, finance, hospitality, and transportation – saw more significant percentage gains in 2018.
The increases aren’t isolated to Michigan, either. On the nationwide level, construction employment rose by 52,000 jobs in January 2019, compared to just one month before. In total, the United States added 338,000 jobs between January 2018 and January 2019. Based on these figures, the construction industry seems to be booming.
But do actual construction project statistics tell the same story? Not quite.
The Home Builders Association (HBA) tracks building permits for single-family and multi-family housing projects in different geographical areas throughout the country. The HBA does not yet have final census data for 2018, but projected that the Grand Traverse County area would end the year with 429 new single-family building permits and 93 new multi-family building permits. If these numbers hold true, they mark a slight drop from each of the previous years. December 2016 statistics indicated 434 single-family permits and 172 multi-family permits for the year, while 2017’s numbers were 449 and 125, respectively.
Data for housing starts – residential construction projects that moved past the permitting process and actually broke ground – is comparable. Through the fourth quarter of 2018, Grand Traverse County saw 495 total housing starts, including 345 single-family homes, 93 apartment units, 45 condo units, and 12 duplexes. In comparison, 2016 saw 648 residential housing starts, while 2017 logged 608.
When asked whether the slight declines in numbers might indicate a downward shift in the industry, Scott Williams, president and COO of local building supply company Kingsley Lumber & Hardware, downplayed the likelihood.
‘“The permit data that I have been receiving so far for 2019 is a little bit lower, but it is far too early to say that it is a trend,” Williams said. “Weather has not been our friend so far in the first quarter, so that has to be factored in. We have also been swamped with jobs to quote compared to last year at this time, so I believe that the business will be there if enough labor can be found to keep things moving forward.”
One potential reason for the slight 2018 slowdown might be the rising cost of building materials. Last year, the Trump administration’s tariffs on metal imports led to spikes in costs for steel and aluminum. According to The Associated General Contractors of America (AGC), a national construction industry association, the cost of steel pipe and tube leaped 22.1 percent between September 2017 and September 2018. In the same window, the industry also tracked increases in the costs of numerous other important materials, including diesel fuel (29.3 percent), asphalt (11.2 percent), and aluminum mill shapes (10.7 percent). AGC noted that these numbers likely do not reflect the full impact of Trump’s tariffs.
As Williams indicated, labor is also a resource in hot demand. While nationwide statistics show that there are plenty of jobs available in the construction industry, the flip side is that there aren’t enough people to fill those jobs. An AGC survey from August 2018 found that 80 percent of construction contractors were having trouble “filling hourly craft worker positions.” Sixty-two percent of companies were responding to this challenge by offering higher salaries.
The rising materials costs and the rising labor costs are combining to squeeze construction companies from two different directions. Even if the industry stays healthy, AGC CEO Stephen E. Sandherr predicts that the higher cost of doing business will create a situation where construction companies cut back on both investments in new equipment and hiring.
In the meantime, there are ample job opportunities in the northern Michigan region for anyone interested in construction. Michelle Socha of Northwest Michigan Works!, who helps local businesses find and recruit new talent, says many employers in the skilled trades are even starting to look at paid on-the-job training programs to attract and develop workers.
“We have been assisting employers with funding toward building apprenticeships in the construction trade,” Socha said.
Apprenticeships are combinations of on-the-job training and classroom learning. An entry-level employee hired into an apprentice role would work closely with a mentor at the business in question to learn the ropes of the trade and accumulate vital skills and knowledge. At the conclusion of the program, the apprentice earns the credentials or certifications necessary to move to the next stage of the trade. Despite the educational nature of the programs, apprentices earn wages from their very first day on the job.
Employers that embrace apprenticeships typically aim to promote their apprentices through the ranks, in order to get the full return on investment for their programs.
According to Pure Michigan Talent Connect, Michigan is one of the top states in the country for apprenticeship programs, with more than 1,000 registered programs statewide and more than 18,000 apprentices currently active across the skilled trades. Employers interested in adding apprenticeships must meet certain federal standards and register their programs with the United States Department of Labor.
Michigan’s push for apprenticeships is needed, said Socha. “There’s definitely a need and a shortage of talent,” she said.
Construction in Northwest Michigan
Northwest Michigan Works tracks data in various job markets by looking at sources such as the Bureau of Labor Statistics, Pure Michigan Talent Connect, and the Michigan Department of Technology, Management and Budget. Northwest Michigan Works defines construction jobs as including general labor, utilities, electricians, plumbers, HVAC technicians, and contractors.
- In the last 180 days, MiTalent.org, a state labor exchange website, has listed 486 construction-related job postings in northwest Michigan.
- Construction jobs in the northwest Michigan region are expected to grow six percent in the next three years.
- In 2018, construction jobs accounted for seven percent of the total jobs in the northwest Michigan region, a figure higher than the state or national averages.
- By 2022, construction jobs are expected to account for eight percent of the northwest Michigan job market.
- Construction is identified as one of the top five industries for growth in the state (the others are healthcare, professional and technical services, transportation and warehousing, and administrative and waste services).