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Construction Trends | February 2024

Construction Industry Adds 17,000 Workers in December

The construction sector added 17,000 employees in December and continued to raise wages at a faster clip than other industries, the Associated General Contractors of America reported in an analysis of government data. Association officials said the survey it released this week found contractors expect to hire more employees in 2024 but are struggling to find enough qualified workers.

“The above-average wages that the construction industry pays have helped contractors add workers,” said Ken Simonson, the association’s chief economist. “More than two-thirds of firms in our survey say they plan to expand in 2024 but they expect it will be as hard or harder to do than it was in 2023.”

Construction employment in December totaled 8,056,000, seasonally adjusted, an increase of 17,000 from November. The sector has added 197,000 jobs during the past 12 months. That was a gain of 2.5%, which outpaced the 1.7% job growth in the overall economy. Residential building and specialty trade contractors added 5,500 employees in December and 40,100 (1.2%) over 12 months. Employment at nonresidential construction firms—nonresidential building and specialty trade contractors along with heavy and civil engineering construction firms—climbed by 11,900 positions for the month and 157,300 (3.4%) since December 2022.

Average hourly earnings for production and nonsupervisory employees in construction—covering most onsite craft workers as well as many office workers—climbed by 5.1% over the year to $34.92 per hour. Construction firms in December provided a wage “premium” of nearly 19% compared to the average hourly earnings for all private-sector production employees.

According to a recent AGC survey, 69% of the nearly 1,300 responding construction firms reported they expect to add to their headcount in 2024, while only 10% expect to reduce headcount. But 55% of respondents, including both union and open-shop employers, expect it will be as hard or harder to do so than in 2023.

Nonresidential Construction Adds Nearly 12,000 Jobs in December

The construction industry added 17,000 jobs on net in December, according to an Associated Builders and Contractors analysis of data released Jan. 5 by the U.S. Bureau of Labor Statistics. On a year-over-year basis, industry employment has grown by 197,000 jobs, an increase of 2.5%.

Last month, nonresidential construction employment increased by 11,900 positions on net, with growth in 2 of the 3 subcategories. Nonresidential building added 8,100 positions, while nonresidential specialty trade added 4,300 jobs on net. Heavy and civil engineering lost 500 jobs.

The construction unemployment rate fell to 4.4% in December. Unemployment across all industries remained unchanged at 3.7% last month.

“Despite strong construction industry employment growth, today’s jobs report was highly contradictory,” said ABC Chief Economist Anirban Basu. “On one hand, economy-wide payroll employment expanded faster than expected in December, and the unemployment rate remained unchanged at 3.7%, close to the lowest level in over a half a century. Construction employment increased for the ninth consecutive month, with the nonresidential segment adding jobs at a particularly rapid pace.

“On the other hand, the labor force shrank by 676,000 persons in December, the largest decline since early 2021,” said Basu. “Wage growth also accelerated, with average hourly earnings up 4.1% year over year across all industries. That’s faster than expected and a level not consistent with a return to 2% inflation. Construction industry earnings have increased at an even faster rate over the past year.

“This is only one month’s data and could contain significant statistical noise,” said Basu. “That said, the combination of faster wage growth and a smaller labor force suggests that interest rates could remain higher for longer.”

Dodge Momentum Index Improves 3% in December

The Dodge Momentum Index, issued by Dodge Construction Network, rose 3% in December to 186.6 (2000=100) from the revised November reading of 181.5. Over the month, commercial planning grew 1.0% and institutional planning improved 6.1%.

“The momentum index ended the year 11% below the November 2022 peak, ultimately stabilizing as the year progressed. Regardless, the DMI averaged a reading of 184.3 in 2023, hitting levels of activity that haven’t been recorded since 2008,” stated Sarah Martin, associate director of forecasting for Dodge Construction Network. “While ongoing labor and construction cost issues will persist in 2024, a substantive amount of projects are sitting in the planning queue and will support construction spending going into 2025.”

Hotel and data center planning drove growth in the commercial segment of the DMI over the month of December, while stronger healthcare and public building planning supported more momentum on the institutional side. Year over year, the DMI was 2% lower than in December 2022. The commercial segment was down 9% from year-ago levels, while the institutional segment was up 14% over the same time period.

A total of 23 projects valued at $100 million or more entered planning in December, with six valued over $400 million. The largest commercial projects include the $500 million Universal Theme Park Kids Resort and Hotel in Frisco, Texas, and the $400 million Dog River Industrial Park in Mobile, Alabama. The largest institutional projects include two Mayo Clinic buildings, each valued at $400 million, in Rochester, Minnesota.

The DMI is a monthly measure of the value of nonresidential building projects going into planning, shown to lead construction spending for nonresidential buildings by a full year.

Backlog Indicator Inches Higher in December, Contractor Confidence Improves

Associated Builders and Contractors reported today that its Construction Backlog Indicator increased to 8.6 months in December from 8.5 months in November, according to an ABC member survey conducted Dec. 20 to Jan. 4. The reading is down 0.6 months from December 2022.

The South, which remains the region with the lengthiest backlog, posted the largest monthly increase in December. Only the West, which historically reports the lowest backlog of any region, experienced a monthly decline.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased in December. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

“Collectively, contractors experienced an uptick in optimism during the holiday season,” said ABC Chief Economist Anirban Basu. “Credit conditions eased a bit during the last days of 2023 as the Federal Reserve indicated that its next set of moves will be to reduce borrowing costs. That may have rendered project financing a bit easier, translating into both improved backlog and more optimism regarding sales, employment and profit margins for the for the first half of 2024.

“Still, there remains cause for concern,” said Basu. “Recent data indicate that wage pressures persist, which makes it more likely that interest rates, and therefore project financing costs, will remain higher for longer. Geopolitical instability appears to be on the rise, raising the probability of a major conflagration that could further impact supply chains and potentially cause steep increases in certain energy prices.”

Monthly Construction Input Prices Fall Sharply in December

Construction input prices decreased 0.6% in December compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released Jan. 12. Nonresidential construction input prices decreased 0.4% for the month.

Overall construction input prices are 1.2% higher than a year ago, while nonresidential construction input prices are 1.6% higher. Prices decreased in 2 of the 3 energy subcategories last month. Crude petroleum input prices were down 13.2%, while unprocessed energy materials were down 9.1%. Natural gas prices rose 1.5% in December.

“Construction input prices fell sharply in December,” said ABC Chief Economist Anirban Basu. “While plunging oil prices are the primary factor behind the sharp decline, most input prices were tame in 2023’s final month. That serves as a fitting end to a year during which aggregate input prices increased just 1.2% and many individual commodity prices actually fell.

ABI November 2023: Business Conditions Remain Soft at Architecture Firms

Business conditions remained soft at architecture firms in November, as the AIA/Deltek Architecture Billings Index remained below 50 with a score of 45.3 for the month (any score below 50 indicates declining billings). The score increased by one point from October, indicating that slightly fewer firms reported a decline in billings in November, but the majority of firms continued to report weak business for the fourth consecutive month, and the seventh month so far this year. However, there are still some encouraging signs of potential work in the pipeline as inquiries bounced back in November after declining in October. And while the value of new signed design contracts continued to decrease in November, fewer firms reported a decline than in October.

Billings also remained weak at firms around the country in November, with firms in all regions reporting a decline for the fourth consecutive month. Business conditions remained softest at firms located in the West, which has been the case since March. And firms of all specializations also reported declining billings, with conditions remaining weakest at firms with a multifamily residential specialization. Billings also continued to decline further at firms with an institutional specialization, which was the strongest sector earlier this year.

In the broader economy, conditions remain largely stable. Industry employment currently stands at 201,200; and while that is 2,500 below the most recent peak in July, it is 2,300 above where it was one year ago.

Inflation continues to moderate as well, with the Consumer Price Index rising by an annual rate of 3.1% in November, well below the latest peak of 9.1% in June 2022, while inflation increased by just 0.1% from October. Energy prices have declined significantly in recent months, with gas prices declining by 6% in November and 5% in October. However, housing costs have continued to increase, with rent rising by 0.5% over the last month.

GMS to Acquire Kamco Supply Corporation

GMS Inc., a North American specialty building products distributor, has entered into an agreement to acquire Kamco Supply Corporation and affiliates. The transaction is expected to close during the fourth quarter of fiscal 2024 for GMS, which ends on April 30.

Founded in 1939 by the Swerdlick family and headquartered in Brooklyn, New York, Kamco is a supplier of ceilings, wallboard, steel, lumber and other related construction products. The company operates five distribution facilities in the Greater New York City area and services the New York metro and tri-state area. For the 12 months ended June 30, 2023, Kamco recorded revenues of approximately $245 million.

Following the close of the transaction, Kamco President Scott Little and the Kamco senior leadership team will continue to lead the business, and the company will continue to operate under the “Kamco” brand as it has for over 80 years.

L&W Supply Names Mark Woodsum Vice President of Its North Central Region

L&W Supply, a nationwide distributor of interior building materials and construction supplies, has announced the promotion of Mark Woodsum to vice president of its newly created North Central Region.

Woodsum joined the L&W Supply team in 2015 as a sourcing manager. Since then he has served in many roles, including branch manager of the Roselle, Illinois, location; national metal merchandising manager; Upper Midwest District manager; and regional business manager.

As North Central Region vice president, Woodsum is now responsible for leading the region, optimizing processes and reinforcing L&W Supply’s commitment to customer and vendor relationships.

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