The construction sector in Georgia has done so well it seems to be out-pacing the economy’s ability to fuel its growth.
Even while there’s murmuring about a possible recession, industry leaders say they expect the economy to keep expanding, but they have reached the point where more construction spending is testing their ability to do the work.
Unlike the boom that led to the crash of the construction sector after 2006, the problem is not the wild building followed by a dearth of demand, said Michael Dunham, chief executive officer of Associated General Contractors of Georgia. “Right now, things look pretty good, and it looks to me like the growth is measured.”
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It’s just that the skills needed to do the projects are in short supply, he said: Steady job growth, combined with baby boomer retirements and restricted immigration have tightened the labor market.
“For every four people I have aging out, I am only getting one new person back,” Dunham said.
That tilts the market toward workers with the right construction skills. And it means pay hikes for many jobs and signing bonuses for others.
“You go out on the street with a degree, you can find a job in a couple weeks or a month,” Dunham said. “If you have a carpentry skill, you could be employed before it’s dark.”
He supports programs — some with government partnership — that offer training. And he would like to see reform of immigration to make sure more workers are available.
But neither of those is an immediate fix. And in the meantime, many contractors scramble. To find skilled workers they need probably means paying more. Not finding them means doing the job with fewer people.
Either way, it has an impact.
“The reality is that if we don’t have the workforce, projects will go longer, projects will be more expensive, or they may have a smaller scope,” Dunham said. “These are the realities when you don’t have enough people.”
In a recent survey by the Associated General Contractors of America, 85 percent of contractors said they were having trouble filling skilled jobs and 56 percent said were having trouble filling salaried positions.
Randall Redding, CEO of R.K. Redding Construction, Inc. in Bremen, said many subcontractors are short on staff, and his company has to use overtime to get jobs completed on time. School renovations, for example, are scheduled for the window of less than three months between sessions.
“If you don’t have a full crew, if instead of a dozen masons you have six, it just takes more time,” he said. “You have to work weekends and at night to get it done.”
Construction spending is up about 5 percent this year and will likely match that pace in 2019, said Kenneth Simonson, chief economist for the national group. “But much of that will be eaten up by higher costs.”
Those higher costs come with contractors already facing higher interest rates, which raise the cost of loans. Additionally there’s been a hike in the cost of materials, partly because of the trade war with China, as well as conflicts with Canada over lumber.
“The tariffs that hit steel – some construction companies have felt that pain,” he said.
He remains optimistic that the economy has the momentum to accelerate through the headwinds.
“These are problems, but I think they are not enough to cause a recession.”
A dozen years ago, the economy of Atlanta and Georgia was dependent on housing, much more so than most other regions. So, when housing crashed, Atlanta and Georgia were hurt much more badly than most regions.
Construction jobs are still not back to their pre-recession peak.
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