Housing Rebound Stymied by Spot U.S. Labor ShortagesJeanna Smialek
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, Virginia-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.”
While new homes sales fell more than forecast in July, that was probably an immediate response to rising interest rates and will be temporary, said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit.
Purchases dropped 13.4 percent to a 394,000 annualized pace following a revised-down 455,000 rate in the prior period, Commerce Department figures showed today in Washington.
“Demand is still going to be there for construction employment,” Price said. He said as consumers realize that rates remain historically low despite the increase, they will re-enter the market. “Demand for housing is going to remain quite strong despite this near-term reaction to the jump in interest rates.”
New-home purchases were 6.8 percent higher in July than in the same period in 2012 on an adjusted basis, the report showed.
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.
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 Inc.
“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 Inc., 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 Corp. and Toll Brothers Inc. 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.”
Marcellus Ologide, 20, is among those entering the workforce. The Landover, Maryland, native is learning carpentry at the Home Builders Institute’s program at Keystone Job Corps Center in Drums, Pennsylvania.
“I plan on working for construction after I get my journeyman’s certification, which will be four years from now,” said Ologide, who started at the center last August. “Especially in D.C., where I’m close to, there is a lot of construction here.”
Yet longer-term, there may not be enough entrants such as Ologide to replace aging construction workers, said Ken Simonson, chief economist for Associated General Contractors. Echoing demographic shifts in the overall U.S. workforce, the median age of construction and extraction workers in 2012 was 41.4, based on Bureau of Labor Statistics data, up from 38.2 in 2007 and 37.9 in 2000.
“Construction was already losing out among high school students, and that was before the recession,” Simonson said, saying that the “extra-deep” drop during the recession might discourage young people from entering the field. “It’s dirty, it’s cyclical, it’s all of those things.”
Highly skilled construction workers such as master plumbers are aging out of the field, and there may be a shortage of younger Americans with the time-intensive training needed to replace them, said NAHB chief lobbyist James Tobin.
In a 2010 study, the Sloan Center on Aging and Work at Boston College found that of 58 construction firms surveyed, half said that an aging workforce would “negatively” or “very negatively” affect their business.
If a Senate-passed immigration bill becomes law, it could create further construction labor constraints, Turmail of the contractors association said. The measure would limit the number of immigrants who could get guest-worker visas for construction at 15,000.
The cap should “at least be adjustable over time” and in response to demand or it could constrain builders, said Jeff DeBoer, president of the Real Estate Roundtable in Washington, whose members include leaders of commercial real estate companies. Currently, there is no specific industry limit as temporary, foreign construction workers fall under a larger category of H-2B visas with a cap of 66,000.
Immigrants accounted for 22 percent of the construction workforce in 2011, based on an NAHB analysis of American Community Survey data, and 15,000 new visas per year won’t suffice should building accelerate, said Tobin. He said it’s tough to put a number on a more appropriate cap without knowing where demand will be.
“The numbers don’t add up, when you think about all of the workers we’re going to need,” Tobin said. “It needs to be a truly market-based program that ebbs and flows with the economy.”
Leaders of the Republican-controlled House have said they will pursue their own proposals for immigration, possibly when they return to Washington in September.
Changes in the construction labor force -- both demographic and policy-driven -- are taking place against a backdrop of growing demand. Housing starts increased 5.9 percent to an 896,000 annualized pace in July as multifamily projects picked up. In June, job openings in construction increased 30 percent from the prior month to 133,000, the largest percent change of any industry and the highest number since May 2008, based on Bureau of Labor Statistics data.
Job posting website Indeed.com has seen a 102 percent increase in the number of construction industry spots -- not counting staffing agency postings -- compared with June 2012. Top cities include New York, Houston, Newark, Jersey City and Anaheim, California, according to company analysis.
As demand for workers recovers, classes offered by the Home Builders Institute are full, president John Courson said. HBI is the workforce development branch of the NAHB. While cuts to government-funded Job Corps caused the institute to drop some classes, it is expanding non-Job Corps offerings, Courson said.
Shelton’s program is also growing its reach, having recently received a Heinz Endowments grant that will allow him to get offices and a staff “up and running,” he said. Shelton said he has also been helped by the Richard King Mellon Foundation and the Institute for Entrepreneurial Excellence at University of Pittsburgh.
Shelton doesn’t know when he’ll hand off his business to his son, Bob, who is 29. In the meantime, he is creating a younger workforce with members such as Howard Cruse.
Cruse, 35, trained at the Pittsburgh masonry class in mid-2010 and now works for Shelton. He had never held a job before he attended Shelton’s program following five years of incarceration, he said.
These days, he wakes around 5 a.m. and heads to a worksite. There, he ensures mortar is mixed and lays blocks, responsibilities he said he enjoys.
“I just like the fact that it builds my character,” Cruse said. “It couldn’t have been better. After I graduated, he hired me for his own company. It must have been a blessing for us both.”