Ken Simonson, chief economist of the Associated General Contractors of America.
In 2020, total construction spending across the U.S. will continue to climb, but Ken Simonson, chief economist of the Associated General Contractors of America (AGC), admits it will be "pretty modest."
"Employment gains are still likely to continue, but at a slower rate. In terms of what this means for construction, contractors remain busy and confident," Simonson said.
Every summer, AGC surveys contractors, asking what their companies expect in terms of expanding, maintaining or decreasing employment, along with questions about how hard jobs will be to fill and related topics, Simonson explained at the Energy Summit 2019 held recently at Louisiana State University in Baton Rouge. Nationally, 91 percent of respondents said they expect to expand or at least replace employees in 2020. However, Simonson added that 80 percent of respondents said they are currently having trouble filling available positions.
As recently as just over a year ago, Louisiana was among only a handful of states to reach peak employment, but since then, the state's employment rate has declined.
"It started in 2015 ⦠Both the U.S. as a whole and Louisiana were adding jobs like crazy. But then we started hearing more and more companies saying they couldn't even find enough workers, and meanwhile Louisiana has always been on that rollercoaster of getting massive projects, and when they finish up, people go away," Simonson explained. "Things boomed again in 2017, but they've really been tapering off since then."
Even with the difficulty in hiring workers, Simonson said the construction industry remains positive overall. "Nationally, we think many more metros would be adding construction workers if they were out there," he stated. "The industry is actually bringing people on like crazy still, and job openings have soared to the highest in the 19-year history of this series. They almost match hires. In other words, if the workers had been available with the right skills, the industry says it would have taken on almost twice as many people as it actually did in August [2019]."
Contractors said they expect to stay busy in 2020; most of those surveyed by AGC have projects lined up for the year. "I haven't run into a contractor yet who has talked to me about projects being cancelled or deferred by owners," Simonson noted.
In terms of costs, the construction industry is still cautious, however, as tariffs were particularly painful for contractors in 2018. Simonson said contractors are concerned tariffs might hit them on products they will be buying for projects they already have a contract to work. He added that the industry experienced a favorable change in 2019 when President Trump removed the tariffs he had previously put on Canadian and Mexican steel.
Although it can be difficult to track all of the industry's data regarding costs, Simonson said he believes companies have been paying more for their workforce due to expenses like searches, training, travel and per diem, and lost experience.
"My forecast for next year is that total construction spending will continue to climb -- no recession," he noted.
Addressing the concerns about whether the 10-year record-setting run of overall economic growth will continue, Simonson said based on AGC's survey, neither a decline in real GDP nor a recession is expected for 2020. He forecasts GDP growth, while slowing down from recent years, will still grow by nearly 2 percent. Power sector construction will remain one of the largest categories in 2020, with pipeline projects leading the way.
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