Construction contractors have a mixed outlook for 2024. Demand is projected to remain high, but persistent challenges, including labor shortages, higher interest rates and input costs, and supply chain concerns, still remain, according to A Construction Market in Transition: The 2024 Construction Hiring and Business Outlook from the Associated General Contractors of America (AGC) and Sage.
“2024 offers a mixed bag for construction contractors: On one hand, demand for many types of projects should continue to expand, and firms will continue to invest in the tools they need to be more efficient,” Stephen Sandherr, CEO of the AGC, says. “Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs, and weathering the impacts of higher interest rates.”
The net reading—the percentage of respondents who expect the available dollar value of projects to expand compared with the percentage who expect it to shrink—is positive in 14 of the 17 categories included in the AGC’s survey.
While the outlook was more positive for industrial sectors, the outlook for residential construction, including multifamily residential, was mixed, with almost the same percentage of firms projecting the dollar value of projects would decrease as increase. According to the AGC, 33% of firms in the multifamily residential sector projected the dollar value of projects would expand in 2024, while 29% of firms projected the dollar value of projects would contract. Other categories with net negative readings include lodging, private office construction, and retail.
More than two-thirds of respondents expect to add to their headcount in 2024, compared with only 10% who expect headcount to decrease in the coming year. Additionally, nearly one-quarter of respondents anticipate headcount for their firm increasing by more than 10% in 2024.
Despite the optimism, finding labor will likely remain a significant hurdle for construction firms in 2024. More than three-quarters of respondents in the AGC survey said they are having a hard time filling some or all salaried or hourly craft positions. The majority of respondents said they anticipate hiring will continue to be hard or become more difficult in the next 12 months.
In an effort to attract labor, 63% of firms said they increased base pay rates more in 2023 than in 2022. Twenty-five percent of firms provided incentives or bonuses, and a further 24% increased their portion of benefit contributions or improved employee benefits in the past 12 months.
Less than a quarter of respondents said they had not experienced any significant supply chain problems in the past year. Despite the supply chain challenges, nearly two-thirds of firms cited rising interest rates or financing costs as their biggest concerns for 2024. Other top concerns for the year ahead include the insufficient supply of workers or subcontractors, the likelihood of an economic slowdown, rising direct labor costs, worker quality, and material costs.
