On Construction Industry: Missouri’s Climate Mixed, National Policies Bring Uncertainty

Feb 23, 2017

The chief economist for The Associated General Contractors of America says the nation’s construction climate is poised for increased spending and employment, although qualified workers will remain hard to find. 

Ken Simonson offered remarks at the AGC’s annual convention in Branson Wednesday under the title Will 2017 Bring Prosperity or Peril to Construction?

“I think we’ve seen a huge growth in uncertainty since Election Day,” Simonson told KSMU, visiting the studio in Springfield shortly after his speech.

The national policies that emerge on regulation, immigration, trade and tax all bring new possibilities and challenges, he says.

Ken Simonson is the chief economist of AGC.
Credit Scott Harvey / KSMU

He notes that it’s a mixed construction climate in Missouri. The state’s 3 percent rise in construction employment from Dec. 2015 – Dec. 2016 was higher than the national rate, says Simonson. But those numbers vary by region.

“Here in the Springfield area there was a small increase in employment. Over in Kansas City, a seven percent drop in construction employment in that particular 12-month period. St. Louis was up for that period,” he said.

The Bureau of Labor Statistics (BLS) shows the 1 percent bump in construction employment in the Springfield area, as of December, brought the number of workers to 8,300.

AGC of America represents more than 26,000 construction firms nationwide. In Missouri, that includes over 500 commercial, industrial, heavy and highway contractors, industry partners and related firms in 110 counties. Simonson said contractors overall told the organization they are optimistic about the outlook for construction in 2017, while survey respondents in Missouri were “more of a mixed picture,” anticipating fewer projects at the highway and higher education levels, among other sectors.

Worker shortage was cited as the biggest concern by 68 percent of those surveyed. According to AGC, 35 percent said they are having trouble filling both salaried and craft worker positions, and nearly half feel it will become harder to find qualified professionals moving forward.

“The reason the employment hasn’t risen as fast is that companies can’t find unemployed former construction workers” he says. “They’ve either retired, they’ve found jobs in other industries, [or] they’ve gotten discouraged and dropped out of the workforce.”

Citing BLS data, Simonson said those who are unemployed that last worked in the construction industry topped two million in December 2010. As of December 2016, the number was around 600,000.

“Basically the pool of available, experiences construction workers has really dried up.”

He says AGC has been working with local school districts and workforce development groups to try and grow that pool of potential hires.

“And also to get out the word to younger kids in school that construction isn’t just a dirty, outdoor job with no future in it. You really get to play with cool toys these days.”

Simonson cited drone usage and other technologies that the industry is now using.

And with those new responsibilities comes more pay. In the past 12 months, the average hourly earnings for construction workers went up 3.2 percent, says Simonson.

“That’s more than the gain in the last 12 months for all private sector employees. So that gap is growing as contractors bid more to get workers to come into construction, to stay in construction. And also they’re having to pay more overtime hours because of the shortage of workers and the need to keep the experienced workers on to train the new ones they’re hiring.”

Earlier this year, Gov. Eric Greitens signed legislation making Missouri the nation’s 28th Right-to-Work state. Proponents say it will bolster Missouri’s economy by making it more business-friendly.

From a construction industry’s perspective, Simonson says he’s noticed more excitement surrounding the law from those who see an opportunity to pull in business from another state.

In a statement prior to the Feb. 6 bill signing, AGC of Missouri President Leonard Toenjes said the organization “is investing resources and working with organized labor to best manage the changing labor environment for Missouri contractors. We are working to help these contractors remain competitive for years to come.”     

Donald Trump’s presidential victory in November brought with it optimism and uncertainty across the industry.  The president has pledged to invest $1 trillion in rebuilding the nation's roads, bridges, tunnels and airports. But Trump has offered few specifics for such a plan.

Simonson says contractors “would be delighted if the money showed up.”

“But so far - I guess we’re all from Missouri – we say ‘show me’ where the money is and whether it will be sustained,” says Simonson.  

He questions whether the measure would call for a one-time investment, which could create a supply and demand issue down the road.

“I think Missouri experienced that a few years ago; you had a surge of bridge projects and a major rebuild of interstate highway and now people are just desperate to find more work at a comparable level.”

Simonson notes that companies can’t hire workers and buy equipment if they don’t see a sustained use for that.

The Trump Administration’s immigration policy could bring entirely different scenarios for construction workers and their employers. BLS data compiled in 2015 show foreign-born workers were more likely than native-born workers to be employed in construction occupations.

Simonson says the notion that construction is the industry of choice for immigrants is not as true now as it was before the recession. And over the past nine years, construction jobs once held by Mexicans have been replaced somewhat by people from Central America and Asia, he says.  

“If immigrants are either pushed out or decide that the country is no longer a place that they can come to and work and advance in another industry that means the industry’s gonna be competing even more for those same workers that construction hires.”

He says it’s a big question mark over how much construction work will be done in the next few years, noting it applies to both the workforce and population’s effect on the demand for construction.

“If the population stops growing because so many people stop coming into the country or are deporting that’s gonna cut into the demand for housing, for schools, for stores and many consumer services.”

Overall, Simonson feels the strongest prospects for 2017 are single-family home building, office and warehouse construction and development at the public school level stemming from voter-approved bond issues. Building for retail space will remain flat, he projects, while limited budgets at the higher education and public works levels will offer minimal growth this year.