Construction industry booming again


AGC Chief Economist Ken Simonson called Michigan’s rankings “unusual” because not a single metro area experienced an employment decline. Photo by Mike Nichols

After a long and painful period of economic recession, West Michigan’s construction industry seems to once again be ripe with jobs.

According to a new report from the Associated General Contractors of America — a Washington, D.C.-based association that operates in partnership with a nationwide network of 95 chapters — construction jobs are booming at the national, state and local levels, and especially in Michigan, said Ken Simonson, chief economist for AGC of America.

Simonson visited Grand Rapids-based Rockford Construction last week to announce the report’s findings, which processed the addition of construction, mining and logging jobs from October 2013 through October 2014 across 339 metro areas nationwide.

The report, which used statistics from the Bureau of Labor Statistics, revealed that in the Grand Rapids-Wyoming metro area, the construction, mining and logging industry employed approximately 15,500 people in October 2013, and that number rose to 17,400 in October of this year, marking a 12 percent increase.

The Holland-Grand Haven metro area also saw an employment increase in that timeframe, from 4,700 to 5,300, marking a 13 percent increase — the highest percentage increase of the 16 metro areas measured.

Michigan was unusual among the state rankings, noted Simonson, who said there wasn’t a single metro area in the state that had a decline in employment.

“In many states, even while the overall state figure was positive in about three-quarters of the states, you still often had wide variation from one metro to another. But in Michigan, you had a couple metros that had no change and nearly every metro was positive,” he said.

“Grand Rapids was particularly strong. From contractors that I’ve talked to here in the city, what you have going on in the west side is certainly contributing in terms of new apartment construction, some new retail businesses.”

Michigan has the potential to keep adding jobs, Simonson said, but that will depend on getting more funding for highways and approval for pipelines. For now, he’s cautiously optimistic about the comeback. There is potential to bring employees back, he said, but many have moved away permanently, and the new challenge will be to attract and train the next generation of workers.

“Just as employment dropped so much more severely in construction, we’ve seen a huge drop in construction spending from 2006-2011 — about a 38 percent decline in construction spending,” he said.

“The construction industry nationwide lost 30 percent of its workforce from 2006-2011. All industry employment shrank by about 8 or 9 percent over a much shorter period. It started turning positive a full year before construction. So it’s natural that millions of those — a total of 2.3 million people — were laid off in construction, and so far we’ve only gotten back about a third of those.”

Simonson said in terms of a construction employment plateau, Michigan’s construction employment peak occurred in spring 2000, earlier than any other state. When the rest of the country had a housing boom in the middle of the last decade before peaking in 2006, Michigan’s construction employment population was stable or already declining, partly owed to the difficulties facing the auto industry at that point, he said.

“You continued to have a further decrease in construction employment. You have had two years of continuous increases now, but you’re still 36 percent below peak, whereas the country as a whole is 21 percent below peak,” he said.

Simonson expects construction spending will be up “somewhere between 6 and 10 percent of this year and next year,” he said, adding that last year it grew about 6 percent, which he called a “modest acceleration.”

“I think the gains will be most pronounced in multi-family construction, and I know here in Grand Rapids there’s supposedly 1,000 people looking for keys for places to live in the city itself in this downtown and west side area, and that’s true of metro areas throughout the country,” he said.

Although there are definitely no guarantees in construction, Simonson said, the country is now five years past the Great Recession, and construction has been adding jobs and spending for the last three-and-a-half years.

“More and more workers are finding that when they finish a house or a road project, there is another one waiting for them,” he said.

“Construction pay in Michigan is 15 percent above the average for all industries,” he said. “Last year, $53,600 was the average annual pay in construction, so that’s real money. In particular, if you adjust for the post-high-school education, construction is way ahead.”

The statistics show a growing need for construction workers, which has led AGC to create a workforce development plan that outlines a series of recommended “legislative and regulatory reforms” that need to be taken at local, state and federal levels to implement steps to enhance construction education programs and prepare a new generation of workers.

A September AGC survey indicated 83 percent of the more than 1,000 firms surveyed were having trouble finding workers, Simonson said. He is now putting the AGC’s plan out in various forums to media and policymakers to educate the industry on the growing need.

“The number of unemployed construction workers currently seeking employment has tumbled from 2.2 million in January 2010 to 1 million January 2014, according to the Bureau of Labor Statistics,” the AGC report read. “Meanwhile, construction consultancy FMI estimates that the construction industry will need to add 1.5 million new workers to keep pace with demand and replace retirees by the end of the year.”

Here are the plan’s recommendations:

  • Reform and reinvigorate the Perkins Act.
  • Encourage private funding for craft training programs.
  • Improve the Workforce Investment Act.
  • Make it easier for veterans to get training and to be hired.
  • Encourage partnerships between registered apprenticeship programs and community colleges.
  • Expand federal apprenticeship resources and collect more comprehensive data on all apprenticeship programs.
  • Enact immigration reform.
  • Offer community college and technical programs to high school students for free.
  • Make it easier to establish public schools focused on career and technical education.

Simonson said the industry needs to develop a better employment pipeline.

“During the past eight years alone, federal funding for career and technical education has declined from $1.3 billion a year to a 2014 level of just $1.12 billion. That is a 29 percent decline after taking inflation into account,” according to the ACG report.

“As institutions continue to dismantle public career education programs, changing labor trends have diminished participation in union-based apprenticeship training programs. The number of construction workers who chose union representation shrank by 23 percent, from 1.195 million in 2008 to 915,000 in 2013.”

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