Recession temporarily reduced labor shortages, but builders still need to look for quality crews and labor-saving techniques. By David F. Seiders

The recession that began in March 2001 wound up costing the U.S. economy nearly 1.5 million payroll jobs, and the early stages of economic recovery have involved precious little job growth. The construction labor market also softened considerably, largely because of sharp and protracted declines in nonresidential construction activity. This certainly has made it easier for home builders to get construction workers and to upgrade the quality of labor on the jobsite. But a cyclically soft labor market may also have reduced incentives to search out more labor-saving techniques in home building, despite long-term or "structural" problems with construction labor supply.

Labor shortages

The NAHB surveyed nearly 400 single-family builders in April to find out how the availability of labor had changed, compared with the period prior to the recession. Not surprisingly, builders of all sizes and in all regions, said that current labor shortages are nothing like the situations they faced in the late 1990s and in 2000.

As an example, serious shortages of framing crews were reported by only 5 percent of respondents, compared with 25 percent or more in surveys conducted during 2000. Serious shortages of bricklayers were reported by 10 percent of respondents, the highest frequency for any type of construction labor, but this compared to roughly 25 percent back in 2000.

On a regional basis, labor shortages were still relatively serious in the Northeast, but even here the situation had improved dramatically. Fifteen percent of Northeast builders reported serious shortages of bricklayers in April, and that was the highest frequency in the entire survey.

Labor quality

Builders naturally have been able to upgrade the quality of labor on their jobsites as the labor market has softened, but labor quality has remained a key issue for builders throughout the country. Only about one-tenth of builders in our April survey said labor quality was not a concern, and nearly half described quality as a "major" concern. While this is a big improvement from the period just prior to the economic recession (when 81 percent tagged labor quality as a major concern), it's clear that labor quality is largely a structural rather than a cyclical issue.

Labor-saving technology

The structural nature of the labor supply and quality issues should keep builders on the hunt for labor- saving techniques. Our survey showed that vast majorities of builders are using efficient nailing, screwing, and stapling guns as well as cordless power tools and some factory-built components. But modular and panelized units still are not widely used construction techniques. Indeed, only 5 percent of builders in our April survey were building modular units, and another 12 percent had modulars under consideration (three-fourths said they had considered modulars but had decided against it). Government data continue to show small and stable shares of the new-home market for both modular and panelized/precut units (around 3 percent for each in 2001).