The construction industry continues to face a skilled labor shortage, with worker scarcity worsening since the beginning of the pandemic, according to Marcum LLP’s annual analysis of the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey.

The Marcum JOLTS Analysis is produced by Marcum’s National Construction Services group.

Slow Going Post-Pandemic

The construction industry has slowly begun to recover jobs lost in the early months of 2020. “In the first two months of the pandemic, construction lost about 1.1 million jobs, a decline equivalent to 14.2 percent of the industry’s workforce,” said Dr. Anirban Basu, Marcum’s chief construction economist and author of the report. “As of January 2023, the most recently available data as of this writing, there are roughly 7.9 million people on construction payrolls. That’s about 3.6 percent more employees than the industry had at the start of the pandemic.”

But the rate of recovery has put the industry significantly behind the pre-pandemic pace of employment growth. “That’s approximately 400,000 fewer construction employees than there would have been, based on the 2015 to 2020 pace of hiring, had the pandemic not occurred,” Basu said.

The residential sector, buoyed by a boom in new home construction, has gained employees at a faster pace than the nonresidential sector over the past two years. “Residential construction accounted for 39 percent of all construction workers at the start of the pandemic,” Basu said. “As of January 2023, that share had risen to 41.4 percent.”

Nonresidential construction has recovered jobs at a slower pace due to behavioral changes, such as the increased prevalence of remote work and e-commerce. “The nonresidential industry has fared less well, and that’s reflected in the segment’s workforce, which is currently 0.5 percent smaller than at the start of the pandemic,” Basu said.

Open Positions Going Unfilled

The pace of hiring would occur at a more rapid pace if not for ongoing construction labor shortages. “The construction industry averaged 390,500 open, unfilled positions in 2022, by far the highest recorded level over the 21-year period for which the Bureau of Labor Statistics has data,” Basu said. “As of January 2023, one in 20 (5 percent) of construction jobs were unfilled.”

While the construction industry has grappled with labor shortages since long before the pandemic, worker scarcity now affects a majority of economic segments. “In February 2020, there were 7.1 million open, unfilled jobs across the entire economy, close to the all-time high set in November 2019,” Basu said. “By March 2022, job openings had spiked to a new record of 11.9 millions.”

The surplus of open positions has empowered workers to switch jobs, or even industries, in search of higher pay. “The construction industry quit rate, or the share of construction workers who quit their jobs, averaged 2.5 percent during 2021 and 2022,” Basu said. “Over the previous decade, the construction industry quit rate averaged just 1.8 percent.”

Basu warns that given the predictions of recession toward the end of 2023 and the elevated price of construction materials, the industry must take steps to buoy its workforce. “The gloomy economic outlook for the second half of 2023 and beyond and elevated borrowing costs could have dire effects on construction activity,” he said. “The upshot is the construction industry must take drastic steps to ensure that the workforce is sufficiently sized to meet the demand for labor.”

“Warning signs and historical trends of downturn are out there and have been for a little while,” said Joseph Natarelli, Marcum’s national construction leader. “The construction industry, always the first to feel the pinch and last to be relieved of it, saw some minor downturns this June. Jobs are plenty, unemployment is slow still, but nonresidential spending hasn’t grown over the past year and that includes the increases we saw in governmental and infrastructure spending. For now, we are advising our clients to take a skeptical and informed eye to the future.”

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