Construction industry has challenges, but economy is sound

BROOMFIELD — Contractors can expect continued challenges finding workers and meeting the demands of those wanting housing or new commercial space, but the economy for the industry will remain strong at least through 2019, according to Rich Wobbekind, senior economist and associate dean for business and government relations at the University of Colorado Boulder Leeds School of Business.

Wobbekind delivered the final segment of the inaugural Rocky Mountain Construction Summit Thursday at the Omni Interlocken Resort in Broomfield. The summit, sponsored by Boulder law firm Berg Hill Greenleaf & Ruscitti, also included multiple panel discussions that offered legal advice to people involved in the construction activity.

Wobbekind listed several major trends in the construction industry:

  • Recent tariffs on steel and aluminum have added a level of uncertainty to the industry.
  • Contractors and developers have responded by buying steel en-masse in hopes of averting the immediate effects of price increases.
  • The tariffs will likely slow hiring in construction, but the industry still suffers from a shortage of skilled labor.
  • Other construction inputs are also increasing in cost, especially lumber and concrete.
  • Warehouse construction is hot on the commercial side of the industry, joining the already high demand for new residential units.
  • Finding skilled labor, an issue in numerous industries, is especially acute in the construction trades.

The economist said construction jobs have increased 3.3 percent year over year as of March of this year, and unemployment in the construction sector nationwide is about 5 percent, which he said is about the lowest that the industry ever sees. In Colorado, the unemployment rate in the construction industry is even lower.

Colorado added 7,780 construction jobs over the past year, a 5.1 percent increase, Wobbekind said. That was second only to Arizona in the Rocky Mountain West.

Because of the shortages, the average number of hours worked by construction workers is rising, which is resulting in safety and injury concerns, he said.

He said 91 percent of contractors report having a difficult time finding workers, and 58 percent expect or want to hire more workers in the next six months. Because skilled workers are hard to find, 90 percent of contractors have concerns about the skill levels of their crews.

One solution to the labor shortage so far has been increased use of modular and prefabricated components that can be built in a factory instead of the field.

And another major trend in the industry, especially used by the large contractors, is to buy other companies in order to acquire skilled laborers.

Wobbekind quoted FMI Capital Advisors, which determined that acquiring workers is the most important merger and acquisition motivation, and its happening nationwide.

In answer to a question about long-term solutions to the labor shortage, Wobbekind said society needs a new mindset about the labor force. “It starts at the high-school level. We stigmatize them (students) for not thinking about college. We need to emphasize the trades,” he said, noting that everybody in attendance already knew that trades workers can make large incomes. He suggested that the U.S. become more like Europe in channeling young people into occupations while they are still in high school.

Increased numbers of workers are needed to meet huge demand, he said. Colorado leads the mountain west in housing starts overall, and also leads the region in building permits issued.

Housing prices continue to climb — about 10 percent in the past year along Colorado’s Front Range — and will continue until more of the demand is met. Interest rate increases could dampen demand a bit. Wobbekind predicts that 30-year mortgage rates will increase to about 5 percent by year-end because of an expected two or three rate increases from the Federal Reserve yet this year.

Wobbekind, who has delivered numerous economic forecasts so far this year, continues to predict an economic slowdown by the end of 2019 or in 2020.

“We’re in the second longest economic expansion in history, now at eight years and 11 months. We’re 13 months away from it being the longest economic expansion,” he said.

“We’re forecasting a modest dip, maybe a two-quarter dip, not like 2008,” he said. Despite that prediction, which is a national economic outlook, Colorado may avoid it. Colorado remains stronger than the nation, “and when the nation goes into recession, Colorado still might be above it,” he said.

 

BROOMFIELD — Contractors can expect continued challenges finding workers and meeting the demands of those wanting housing or new commercial space, but the economy for the industry will remain strong at least through 2019, according to Rich Wobbekind, senior economist and associate dean for business and government relations at the University of Colorado Boulder Leeds School of Business.

Wobbekind delivered the final segment of the inaugural Rocky Mountain Construction Summit Thursday at the Omni Interlocken Resort in Broomfield. The summit, sponsored by Boulder law firm Berg Hill Greenleaf & Ruscitti, also included multiple panel discussions that offered legal advice to people involved in the construction activity.

Wobbekind listed several major trends in the construction industry:

  • Recent tariffs on steel and aluminum have added a level of uncertainty to the industry.
  • Contractors and developers have responded by buying steel en-masse in hopes of averting the immediate effects of price increases.
  • The tariffs will likely slow hiring in construction, but the industry still suffers from a shortage of skilled labor.
  • Other construction inputs are also increasing in cost, especially lumber and concrete.
  • Warehouse construction is hot on the commercial side of the industry, joining the already high demand for new residential units.
  • Finding skilled labor, an issue in numerous industries, is especially acute in the construction trades.

The economist said construction jobs have increased 3.3 percent year over year as of March of this year, and unemployment…