Contractors Are Optimistic About Strong Economy, Tax & Regulatory Cuts in 2018

February 2018

Seventy-five percent of construction firms plan to expand their payrolls in 2018 as contractors are optimistic that economic conditions will remain strong as tax rates and regulatory burdens fall, according results of an industry survey released by the Associated General Contractors of America and Sage Construction and Real Estate. Despite the general optimism outlined in “Expecting Growth to Continue: The 2018 Construction Industry Hiring and Business Outlook,” many firms report they remain worried about workforce shortages and infrastructure funding.
Respondents are very 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 vs. 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 the association’s Outlook survey series.
Broken down by market segment, 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, both of which had a 21 percent net positive reading. Water & 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 both had a 17 percent net positive reading.
Respondents were only slightly less optimistic about growing demand in other segments. There is a 16 percent net positive for both multifamily residential and public building segments, followed by a 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.
AGC officials noted that 75 percent of firms say they will increase their headcount in 2018, up slightly from 73 percent last year. Most of the hiring will only expand headcounts by a slight percentage per firm, however. Half of firms report their expansion plans will only increase the size of their firm by 10 percent or less. Meanwhile, only 5 percent of firms report plans to expand their headcount by more than 25 percent above their current size. Only three percent of respondents expect to reduce headcount, down from 6 percent last year.
Even as firms expand headcount, an overwhelming majority—82 percent—of firms expect it will either become harder, or remain difficult to recruit and hire qualified workers in 2018, up from 76 percent last year. In addition, 78 percent of firms report they are currently having a hard time finding qualified workers to hire, up from 73 percent at the start of last year.
Firms continue to take steps to address these growing workforce shortages. Sixty percent of firms report they have increased base pay rates, up from 52 percent last year. Thirty-six percent have provided incentives and/or bonuses, up from 35 percent last year. Twenty-four percent have increased contributions and/or improved employee benefits to cope with workforce shortages. Meanwhile, 56 percent of firms report they plan to increase investments in training and development, up from 52 percent at the start of 2017.
Officials with Sage noted that firms appear to be embracing information technology to help address workforce shortages and tight competition. They noted that 50 percent of firms say they currently spend one percent or more of their revenue on information technology, up from 47 percent in 2017. In addition, 43 percent of respondents report they will increase their information technology investments in 2018 compared to the prior year.
They added that information technology can be strategically applied to increase productivity of current staff and compete for more work. They said that helps explain why 52 percent of contractors indicate they currently have formal information technology plans that support business objectives, up from 47 percent last year. An additional 8 percent of contractors report they plan to create a formal information technology plan in 2018.
AGC officials noted that contractors’ overall optimism for 2018 is likely based on two key assumptions: that tax cuts will lead to stronger demand and that the Trump administration will finally deliver on its promise to boost investments in infrastructure. They said that the best thing Washington officials can do to make sure that federal tax cuts deliver on their potential is to continue rolling back needless regulatory burdens.
The outlook was based on survey results from over 1,000 firms from 49 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans.