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News Jan. 5, 2018

Seventy-five percent of contractors expect to expand staffs in 2018

Seventy-five percent of construction firms plan to expand their payrolls in 2018 as contractors are optimistic economic conditions will remain strong as tax rates and regulatory burdens fall, according to

The data is based on survey results released by the Associated General Contractors of America (AGC) and Sage Construction and Real Estate in the report Expecting Growth to Continue: The 2018 Construction Industry Hiring and Business Outlook. Although many firms are optimistic, they report they remain worried about workforce shortages and infrastructure funding.

Respondents are optimistic about demand for all types of construction services as measured by the net positive reading—the percentage of respondents who expect a market segment to expand versus the percentage who expect a market segment to contract. The net positive reading for all types of construction is 44 percent, the highest yet recorded in AGC's Outlook survey series.

Contractors nationwide are most optimistic about the private office market segment, with a 22 percent net positive reading. This is followed by the other transportation and retail, warehouse & lodging segments, which had a 21 percent net positive reading. Water and sewer construction had a net positive reading of 20 percent; K-12 construction had a net positive reading of 18 percent; and highway and hospitality construction had a 17 percent net positive reading.

Respondents were slightly less optimistic about growing demand in other segments. There is a 16 percent net positive for multifamily residential and public building segments; 13 percent net positive reading for power construction; an 11 percent net positive for higher education construction; and an 8 percent net positive for federal construction.

Association officials noted that 75 percent of firms say they will increase their staffs in 2018—up slightly from 73 percent last year. However, most hiring will expand headcounts by a slight percentage per firm. Half of firms report their expansion plans will only increase the size of their firms by 10 percent or less. Meanwhile, only 5 percent of firms report plans to expand their headcount by more than 25. Only 3 percent of respondents expect to reduce headcount, which is down from 6 percent last year.

Still, 82 percent of construction firms expect it will either become more difficult or remain difficult to recruit and hire qualified workers in 2018—an increase from 76 percent last year. In addition, 78 percent of firms report they currently are having difficulty finding qualified workers to hire, which is up from 73 percent at the beginning of 2017.

Firms are taking steps to address workforce shortages. Sixty percent of firms report they have increased base pay rates compared with 52 percent last year. Thirty-six percent have provided incentives and/or bonuses compared with 35 percent last year. Twenty-four percent have increased contributions and/or improved employee benefits to cope with workforce shortages. Fifty-six percent of firms report they plan to increase investments in training and development compared with 52 percent at the start of 2017.

"While workforce issues remain their top concern, many contractors are also worried about competition and the impact of decisions made in Washington on their operations," says Ken Simonson, AGC's chief economist. He noted that 39 percent of firms said increased competition for projects was one of their biggest concerns for the year. Meanwhile, 28 percent of firms listed growth in federal regulations as one of their top concerns, and 24 percent said one of their concerns was a lack of new infrastructure investments.

Officials with Sage said firms also are looking to information technology to help address workforce shortages and tight competition. They noted that 50 percent of firms say they currently spend 1 percent or more of their revenue on information technology compared with 47 percent in 2017. In addition, 43 percent of respondents report they will increase their information technology investments in 2018.

"Increased competition for projects is driving contractors to advance their use of not only building information modeling but cloud technologies," says Jon Witty, vice president and general manager for Sage Construction and Real Estate, North America. "This is particularly evident in the use of cloud-based mobile solutions on the job sites, where contractors are using mobile software for daily field reports, field access to customer and job information, employee time tracking and approval and the sharing of drawings, photos and documents."

Association officials noted that contractors' overall optimism for 2018 likely comes from two key assumptions: that tax cuts will lead to stronger demand and the Trump administration will deliver on its promise to boost investments in infrastructure.

Expecting Growth to Continue: The 2018 Construction Hiring and Business Outlook was based on survey results from more than 1,000 firms from 49 states and the District of Columbia. To view the report, click here. To view the survey results, click here.

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