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The construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet the demand for labor, according to a model developed by Associated Builders and Contractors (ABC).

In 2025, the industry will need to bring in nearly 454,000 new workers on top of normal hiring to meet industry demand, presuming that construction spending growth slows significantly next year.

“ABC estimates that the U.S. construction industry needs to attract about a half million new workers in 2024 to balance supply and demand,” says Michael Bellaman, ABC president and CEO. “Not addressing the shortage through an all-of-the-above approach to workforce development will slow improvements to our shared built environment, worker productivity, living standards, and the places where we heal, learn, play, work, and gather.”

ABC’s proprietary model uses the historical relationship between inflation-adjusted construction spending growth—sourced from the U.S. Census Bureau’s Value of Construction Put in Place survey and Bureau of Labor Statistics, respectively—to convert anticipated increases in construction outlays into demand for construction labor at a rate of approximately 3,550 jobs per billion dollars of additional spending. This increased demand is added to the current level of above-average job openings. The model also considers projected retirements, shifts to other industries, and other forms of anticipated separation.

“Broadly, there are two factors shaping the interaction between construction worker supply and demand,” says ABC chief economist Anirban Basu. “There are structural factors, including outsized retirement levels, megaprojects in several private and public construction segments, and cultural factors that encourage too few young people to enter the skilled construction trades. There are also structural factors, including those related to interest rates, consumer sentiment, and general economic performance."

Using historical Census Bureau Job-to-Job Flows data, ABC estimates 1.9 million construction workers will leave their jobs to work in other industries in 2024. This should be offset by an anticipated 2.1 million workers who will leave other industries to work in construction.

For the second year in a row, the U.S. construction industry unemployment rate averaged 4.6%, matching the second lowest level on record, while job openings remained historically elevated at an average of 377,000 per month through the first 11 months of 2023. As a result of labor shortages, contractors laid off workers at a slower rate than in any year between the start of the data series in 2000 and 2020.

“Over the past two years, cyclical influences have helped diminish the gap between construction worker supply and demand,” says Basu. “Though nonresidential construction spending has continued to surge, home building segments have felt the impact of higher borrowing costs more intensely. With interest rates set to decline in 2024 and 2025, the expectation is that construction worker shortfalls will remain elevated. Among other things, that would delay the rebuilding of American infrastructure and the creation of new domestic supply chains. It would also tend to drive up the cost of construction service delivery, impacting American enterprise and taxpayers alike.”

Basu says that structural influences persist and more than 1 in 5 construction workers are 55 or older, which means retirement will continue to contract the workforce. He says, “These are the most experienced workers, and their departures are especially concerning.”