Despite signs the overall economy may be slowing, most construction firms expect demand for their services and hiring will expand in 2020, yet even more firms are worried about their ability to find qualified workers to hire, according to survey results released Dec. 18 by the Associated General Contractors of America and Sage Construction and Real Estate.

The findings are detailed in the AGC's report, Strong Demand for Work Amid Stronger Demand for Workers: the 2020 Construction Hiring and Business Outlook.

“Contractors are very optimistic about demand for construction in 2020,” said Stephen E. Sandherr, the association's chief executive officer. “At the same time, many construction executives are troubled by labor shortages and the impacts those shortages are having on operations, training and safety programs, and bottom lines.”

The Outlook was based on survey results from nearly 1,000 firms from 48 states. Varying numbers responded to each question. Contractors of every size answered at least 20 questions about their hiring, workforce, business and information technology plans.

Following are some highlights of the survey:

*Most contractors plan to add staff in 2020 to keep pace with growing demand. The survey found that 75 percent of firms plan to increase headcount this year, similar to the 77 percent with this expectation at the start of 2019 and 75 percent at the start of 2018.

*However, 52 percent of firms report their expansion plans will only increase the size of their firm by 10 percent or less. The survey found that 19 percent of respondents plan to increase headcount by 11 to 25 percent. Only 5 percent of respondents plan to increase employment by more than 25 percent. 

*In Michigan, the demand for workers could be even higher. The survey said 90 percent of respondents currently indicated that "we are having a hard time filling some or all positions." The survey found 93 percent of respondents expect that there would be no change in that tight hiring market in 2020, or it would become even tighter. "Worker shortages" and "worker quality" (both 79 percent) were both listed as the top concerns of Michigan's construction industry respondents.

*From U.S. union contractor respondents, 44 percent said they expected an increase in headcount of between one and ten workers in 2020, while 24 percent expected no change and 6 percent predicted a decrease.

*Despite firms’ plans to expand headcount, 81 percent report they are having a hard time filling salaried and hourly craft positions. That share is up slightly from 78 percent at the start of 2019. In addition, 43 percent expect it will continue to be hard to hire in the next 12 months and 22 percent expect that it will become harder to hire in 2020.

*The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract for all 13 categories of projects included in the survey. For every segment, between 27 and 36 percent of respondents expect an increase compared to 2019 in the dollar value of projects for which they compete. Meanwhile, between 11 and 21 percent of respondents foresee less work available in 2020. 

*Labor shortages are having an impact on construction costs and project schedules, AGC officials noted. Forty-four percent of respondents report that staffing challenges drove costs higher than anticipated. In reaction, 41 percent of firms are putting higher prices into new bids and contracts. Similarly, 40 percent report projects have taken longer than they anticipated and 23 percent report putting longer completion times into their bids or contracts. 

*Firms continue to raise pay and provide bonuses and benefits in response to labor shortages. Fifty-four percent of firms report they increased base pay rates more in 2019 than in 2018. Twenty-three percent provided incentives and/or bonuses. Fourteen percent of firms increased contributions or improved employee benefits to cope with workforce shortages. 

*Construction firms are also investing more in training programs for current and new workers, association officials added. (The survey queried both union and nonunion contractors). Two out of five (42 percent) of firms report they revamped initiatives to recruit labor last year. Thirty-two percent of firms report they have increased funding for technical education programs and 29 percent have restructured or changed programming for current skilled labor recruits.

“Firms are adopting a variety of approaches to replace workers or allow for use of workers with less experience or training than before,” said Ken Simonson, the association's chief economist. He noted that 32 percent of respondents report their firms are investing in labor-saving equipment, including drones, robots and 3-D printers. Twenty-eight percent of respondents are using methods to reduce onsite work time, including lean construction, building information modeling or offsite pre-fabrication.