During the housing downturn, Arbor Custom Homes in Oregon stopped using about three-quarters of its contractor crews. Thanks to the tax credit and other factors, Arbor may be building between 10 and 20 homes per month in 2010, compared to 5 to 10 a year ago, but its activity still remains far below the 35 homes per week it was building during the boom, says construction manager Mark Frasier.
This anecdote from Oregon illustrates what is happening elsewhere in the country: The significant attrition of construction workers during the recession does not appear to be impeding builders from keeping up with demand, such as it is. Frasier, for example, says his company hasn’t had any trouble finding jobsite labor in any trades, as many of the contractors and subs he’s hired in the past are still looking for work.
But contractors, which have cut back mightily on their manpower, can’t always deliver labor with the same expertise as before. Mark Sochar, vice president of construction for Neal Communities in Bradenton, Fla., notes that local contractors have been hiring less-skilled subs and delegating more responsibility to them to keep pace with builders like Neal, which in 2009 started 158 homes. This year, the builder is booked to start between 19 and 23 homes per month through April. “We can deal with this because we’ve kept all of our 18 [supervisors] in the field, but I can tell you that they are spending a lot more time on training and specifications," Sochar says.
Undeniably, the recession has reduced the construction workforce to slimmer pickings. The unemployment rate among residential and commercial tradespeople stood at 22.7% in December, according to preliminary estimates by the U.S. Bureau of Labor Statistics (BLS). That month, 53,000 more construction jobs were lost from the previous month, raising the total of unemployed construction workers above 2 million. “Unfortunately, construction layoffs are dragging down the broader employment picture,” observed Ken Simonson, chief economist for the Associated General Contractors of America, a Virginia-based trade group representing commercial construction workers.
BLS estimates that 676,000 “residential building” contractors were employed in December 2009, down 12.5% from the same month a year ago. “Residential specialty trade contractors” stood at 1.64 million, down 4% from December 2008.
It’s worth remembering, too, that these numbers don’t account for how many undocumented construction workers have returned to their native countries or switched other jobs as their prospects for steady construction work have dwindled in the United States. But builders contacted for this article say they have sufficient labor to draw from, although they also admit they don’t know how long that might continue to be the case.
“It’s not so much a lack of manpower as our trade partners won’t bring on more people to meet our needs,” says Jay Steinberg, construction manager for Westport Homes in Indianapolis, which is currently starting about 20 homes per month. He understands their trepidation, as “no one, not even builders, wants to bring on a new employee” until there’s stronger evidence of sustained buyer demand.
Meanwhile, Steinberg says his company is “coping” with existing worker levels, partly though better jobsite management that includes releasing starts in groups by neighborhood, instead of scattered, so contractors can send crews to fewer locations.
All three builders agree that contractors have become more flexible about what they charge for labor when work is scarce. But while Frasier and Steinberg didn’t sound too concerned about finding labor when business conditions improve, Sochar realizes that the days of cheaper labor might quickly come to an end as soon as Neal’s construction activities expanded. “Over the last two years we’ve reduced our hard costs [for labor and materials] by 45%,” he explains. “Our costs would go up as soon as contractors realized they had more leverage.”
John Caulfield is senior editor for BUILDER magazine.
Learn more about markets featured in this article: Indianapolis, IN, Portland, OR.
