The construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet the demand for labor, according to a proprietary model developed by Associated Builders and Contractors. In 2025, the industry will need to bring in nearly 454,000 new workers on top of normal hiring to meet industry demand, and that is presuming that construction spending growth slows significantly next year.

“ABC estimates that the U.S. construction industry needs to attract about a half-million new workers in 2024 to balance supply and demand,” said Michael Bellaman, ABC president and CEO. “Not addressing the shortage through an all-of-the-above approach to workforce development will slow improvements to our shared built environment, worker productivity, living standards and the places where we heal, learn, play, work and gather.”

ABC’s model uses the historical relationship between inflation-adjusted construction spending growth, sourced from the U.S. Census Bureau’s Value of Construction Put in Place Survey, and payroll construction employment, sourced from the U.S. Bureau of Labor Statistics, to convert anticipated increases in construction outlays into demand for construction labor at a rate of approximately 3,550 jobs per billion dollars of additional spending. This increased demand is added to the current level of above-average job openings. Projected industry retirements, shifts to other industries and other forms of anticipated separation are also embodied within the computations.

Based on historical Census Bureau Job-to-Job Flows data, an estimated 1.9 million construction workers will leave their jobs to work in other industries in 2024. This should be offset by an anticipated 2.1 million workers who will leave other industries to work in construction. These frictional inter-industry transfers are estimated exogenously and serve as inputs to the model.

The U.S. construction industry unemployment rate averaged 4.6 percent for the second straight year, matching the second-lowest level on record, while job openings remained historically elevated at an average of 377,000 per month through the first 11 months of 2023. As a result of labor shortages, contractors laid off workers at a slower rate than in any year between the start of the data series in 2000 and 2020.

“Broadly, there are two factors shaping the interaction between construction worker supply and demand,” said ABC Chief Economist Anirban Basu. “There are structural factors, including outsized retirement levels, megaprojects in several private and public construction segments, and cultural factors, that encourage too few young people to enter the skilled construction trades. There are also structural factors, including those related to interest rates, consumer sentiment and general economic performance.

“Over the past two years, cyclical influences have helped diminish the gap between construction worker supply and demand,” Basu said. “Though nonresidential construction spending has continued to surge, homebuilding segments have felt the impact of higher borrowing costs more intensely. With interest rates set to decline in 2024 and 2025, the expectation is that construction worker shortfalls will remain elevated. Among other things, that would delay the rebuilding of American infrastructure and the creation of new domestic supply chains. It would also tend to drive up the cost of construction service delivery, impacting American enterprise and taxpayers alike.

“Meanwhile, structural influences persist,” Basu said. “More than one in five construction workers are 55 or older, meaning that retirement will continue to contract the industry’s workforce. These are the most experienced workers, and their departures are especially concerning.”

“While construction employment is growing, it is not growing fast enough to meet the demand to complete the work on the books for 2024,” Bellaman said. “To address this shortage and grow the construction talent pool, ABC has a network of more than 800 apprenticeship, craft, health and safety, and management education programs — including more than 450 government-registered apprenticeship programs across 20 different occupations. ABC chapters also have 323 entry-point programs in place nationally to welcome all to begin a career in construction. To address workforce demand that drives the U.S. economy, Congress must also look toward much-needed reforms to our legal immigration system and provide high-demand industries, like construction, with access to new or expanded visa programs.

“Exclusionary policies and programs that do not welcome all to compete to build our public works projects, such as project labor agreement mandates, will further exacerbate this shortage and undermine significant investments made by taxpayers in infrastructure, clean energy and manufacturing projects,” Bellaman said. “Taxpayers and workers are best served by inclusive, win-win policies that create a level playing field for all contractors to compete to build public works projects.”

View the methodology of ABC’s 2024 construction workforce shortage model here.