Significantly more US construction firms are planning to add new staff than plan to cut numbers according to survey results released by the Associated General Contractors of America and Computer Guidance Corporation. The survey, conducted as part of Tentative signs of a recovery: the 2013 construction industry hiring and business outlook, provides a generally optimistic outlook for the year even as firms worry about rising costs and declining public sector demand for construction.
Contractors are increasingly optimistic about their ability to raise bid levels. Twenty-eight percent of firms expect to increase the amount they charge for construction this year, nearly double the 15 percent of firms that increased prices in 2012.
“While the outlook for the construction industry appears to be heading in the right direction for 2013, many firms are still grappling with significant economic headwinds,” said Stephen Sandherr, the association's chief executive officer. “With luck and a lot of work, the hard-hit construction industry should be larger, healthier, more technologically savvy and more profitable by the end of 2013 than it is today.”
Sandherr noted that significantly more firms are planning to add staff this year compared to the number of firms expecting to make layoffs. He said that 31% of firms plan to add staff this year, while only 9% plan to make layoffs this year. The scope of those staff additions are likely to be modest, however, with 79% of firms reporting they plan to hire 15 or fewer people in 2013 and only 13% planning to hire more than 25 new workers this year.
Contractors appear increasingly optimistic that demand for certain private sector projects will expand this year, Sandherr said. They are most optimistic about the outlook for hospital and higher education construction, with 36% predicting the amount of money spent on those projects will grow in 2013 while 39% expect the market will remain stable compared to last year. Contractors were also optimistic about the markets for power construction, but had lower expectations for manufacturing, private offices and retail, warehouses and accommodation construction.
Meanwhile, contractors expect demand for many types of public construction will decline in 2013. For example, 40% of contractors report they expect demand for public buildings to shrink in 2013 while only 18% expect that market to grow.
A significant – but smaller than last year – number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions. Forty percent of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Only 3% of firms reported having an easier time getting credit while 41% report no change in credit conditions.
“Unfortunately, there are almost as many causes for concern as there are signs of optimism,” said Ken Simonson, the association's chief economist. “Demand for public buildings is set to decline, manufacturing work appears to be slackening, materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”
Simonson noted that overall demand for new construction equipment is likely to remain modest in 2013. Sixty-four percent of firms plan to purchase new equipment this year, down from 70% last year, while 77% of firms plan to lease this year compared to 78% in 2012. Contractors are increasingly relying on leasing equipment to avoid having to pay for idle equipment during lags in construction activity, the economist noted. Even as they shift toward more leasing, firms’ appetite for new equipment remains modest, with two-thirds of the firms planning to buy and 73% planning to lease $250,000 or less in equipment this year.
Kirk noted that 60% of firms report they plan to invest in their information technology departments in 2013. He added that 73% of those firms report they expect to invest over $10,000 in new information technology this year.
The outlook, which the association co-sponsored with Computer Guidance, was based on survey results from over 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing and business plans. Economists and specialists from the association and Computer Guidance analysed those comments.
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