The construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet demand, according to Associated Builders and Contractors.
A proprietary model developed by ABC uses the historical relationship between inflation-adjusted construction spending growth from the U.S. Census Bureau’s Value of Construction Put in Place survey, as well as payroll construction employment from the Bureau of Labor Statistics, to convert anticipated increases in construction outlays into demand for construction labor at a rate of about 3,550 new jobs per billion dollars of additional construction spending. The increased demand is added to the current level of above-average job openings; calculations also include projected industry retirements, shifts to other industries and other forms of anticipated separation.
The construction industry averaged 377,000 job openings per month in 2023, and the industry unemployment rate of 4.6% in 2023 matched the second lowest on record. As a result of labor shortages, contractors laid off workers at a slower rate than in any year between 2000—the start of the data series—and 2020.
Based on historical Census Bureau Job-to-Job Flows data, an estimated 1.9 million construction workers will leave their jobs to work in other industries in 2024; this should be offset by an anticipated 2.1 million workers who will leave other industries to work in construction.
“Broadly, there are two factors shaping the interaction between construction worker supply and demand,” said ABC Chief Economist Anirban Basu. “There are structural factors, including outsized retirement levels, megaprojects in several private and public construction segments and cultural factors that encourage too few young people to enter the skilled construction trades. There are also factors including those related to interest rates, consumer sentiment and general economic performance.”
Basu said during the past two years, “cyclical influences” have narrowed the gap between construction workers supply and demand.
“Though nonresidential construction spending has continued to surge, homebuilding segments have felt the impact of higher borrowing costs more intensely,” Basu said. “With interest rates set to decline in 2024 and 2025, the expectation is that construction worker shortfalls will remain elevated. Among other things, that would delay the rebuilding of American infrastructure and the creation of new domestic supply chains. It would also tend to drive up the cost of construction service delivery, impacting American enterprise and taxpayers alike.
“Meanwhile, structural influences persist,” Basu continued. “More than 1 in 5 construction workers are 55 or older, meaning that retirement will continue to contract the industry’s workforce. These are the most experienced workers, and their departures are especially concerning.”