Anyone who watches the job market closely knows that the construction sector has been weak in this recovery. Employment in construction is still down 25 percent from its pre-recession peak, and the industry has a 15.7 percent unemployment rate. So it came as something of a surprise when a trade association representing the construction industry announced that it was experiencing a growing labor shortage.
In its most recent survey of its members, the National Association of Home Builders found that labor shortages have grown across a variety of positions and professions since June 2012. For example, 38 percent of firms currently report "some shortage" of carpenters for rough work, up from 24 percent June 2012. Meanwhile, only 57 percent report no shortage, compared to 71 percent in June. And 23 percent reported some shortage of roofers, up from 14 percent in June 2012. A similar trend holds, to varying degrees, across many other construction-related occupations, including electricians, bricklayers, plumbers and workers in framing crews. While these figures may indicate a strengthening industry, they also could signal future constraints on growing firms looking for workers.
"It's highest in categories of carpentry—rough, finished, framing—but the thing that really stands out is that the trend is just consistently upward," says Paul Emrath, an economist at NAHB.
With a construction job market still reeling from the bursting housing bubble and subsequent recession, it seems counterintuitive that there should be a shortage of construction workers. Rather, one would think that all of those workers forced out of their jobs during the downturn would now be flooding firms with job applications.
However, the length and depth of the recession meant that many construction workers stopped hoping for a construction comeback and moved on—geographically, in some cases, says Emrath.
"These are all labor local markets. In some cases people have moved away, so now if activity is picking up, you've got to recruit new people into the industry and train them, or persuade [workers] to come back from wherever they've moved to," he says.
Another labor expert adds that workers have moved not only geographically but also have transitioned into other industries.
"Some who were undocumented workers have gone back across the border . Others, both documented and undocumented, have found jobs in other sectors of the economy," says Peter Philips, a labor economist at the University of Utah. He also adds that some older, skilled workers left the labor market during the recession and won't be coming back at all, meaning a permanent loss of those workers and their skills.
For now, whatever shortages there might be in the construction industry are small by historical standards. For the 12 occupational categories that the NAHB studies, between 1 and 7 percent of respondents report a "serious shortage" of laborers. Across all categories, that is down from the boom years of the mid-2000s.
That means the industry's labor shortages are not and will not be the key constraint on the housing market. As housing demand slowly (but surely) ticks upward, it has a long way to go before it reaches more normal levels.
"Looking forward, if I had to choose the most daunting challenge for residential construction at the moment, it would be that demand is sustained to continue this process for the next two or three years going forward," says Philips.
While current shortages may cause headaches for some firms, they can also be seen as yet another indication of a strengthening housing market. And though the shortages are mild, the direction is what's important for now, says Emrath: "The point is, we can see which way the trend is going. The trend is going toward more shortages."