Localized construction-labor shortages slow housing rebound

Bloomberg NewsAugust 26, 2013 

CONSTRUCTION254

Stephen Shelton, right, owner of Shelton Masonry and Contracting and founder of the Trade Institute of Pittsburgh, instructs student Kevin Hardy in mortaring a head joint at the school in Wilkinsburg, Pa.

KEVIN LORENZI — BLOOMBERG

Stephen Shelton wants his son to inherit his masonry company staffed with skilled craftsmen. To guarantee that happens, he started a school.

“It’s a real challenge to find really good skilled guys who aren’t 50 years or older,” said Shelton, owner of Shelton Masonry & Contracting and founder of the Trade Institute of Pittsburgh. The nonprofit provides 10 weeks of brick-laying training to participants, focusing on people with troubled pasts. It’s placed 42 people into full-time jobs since 2008, including five at Shelton’s company.

“If you’re willing to give it a shot, I’m willing to give you a shot,” Shelton, 52, said.

While fulfilling what he said is a desire to provide a chance to those who might struggle to find jobs, Shelton is also helping to solve an industry challenge. A shortage of skilled construction workers has been reported by builders in markets including Seattle and Phoenix as homebuilding regains momentum.

The situation could grow worse with an aging workforce and lagging immigrant labor, said Brian Turmail, spokesman for Associated General Contractors of America.

“A lot of folks are worried about a lack of skilled workers, a lack of carpenters, a lack of laborers, a lack of equipment operators,” said Turmail, whose Arlington, Va.- based group represents about 30,000 construction businesses, according to its website. “It’s less the guys who wear suits and boots, like the project managers, it’s the guys who wear boots and jeans.”

Higher demand

Housing is recovering and commercial construction is picking up in some markets, stoking demand for construction workers. Regional labor shortages have been cited in Federal Reserve Bank Beige Book reports on regional economic situations and in builders’ earning calls.

In the June Beige Book, the Philadelphia district commented that “builders are facing problems, as the long housing recession has disrupted the supply chain for materials and the pool of skilled workers.”

More than half the construction companies surveyed by the National Association of Home Builders said labor constraints over the past six months have caused them to pay higher wages or bids for subcontractors and, consequently, raised prices, the Washington-based group reported in March. Forty-six percent had experienced delays completing projects.

“The housing recovery will be a modest one, not only because the overall economy is moving relatively slow, but because rebuilding the infrastructure of the homebuilding industry is taking time,” David Crowe, NAHB chief economist, said in an interview. “The labor shortage has been a contributing factor.”

The U.S. lost about 2.1 million construction jobs from December 2007 when the recession began through January 2011, when industry employment hit its lowest level since 1996.

New directions

Some workers who lost jobs may not come back, said Robert Rulla, who focuses on the homebuilding industry as a Chicago- based director at Fitch.

“A certain number of those laborers retired, have left for different jobs,” he said. The industry had a 9.1 percent not-seasonally-adjusted unemployment rate in July, down from 12.3 percent a year earlier.

That industry rate is still elevated – it exceeds the national unadjusted average of 7.7 percent – and Jed Kolko, chief economist from real-estate website Trulia, said that indicates local shortages don’t persist nationwide. There were 1.7 million fewer people on construction payrolls in July than at the outset of the recession.

Even so, builders such as Lennar and Toll Brothers say they are seeing labor shortages in some markets. They say those will be short-lived because wages will appreciate as demand increases and attract more workers.

“We’re through the worst of it, because this recovery is about a year in,” Toll Brothers Chief Executive Officer Douglas C. Yearley said during a May 8 presentation. “I think workers, kids are coming back into homebuilding.”

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