Will contractors struggle for labor this year? it depends

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The construction sector experienced varying degrees of demand in 2024, with some sectors booming and others losing steam.

How prolonged high interest rates Slowing private building, federal funding from the Infrastructure Investment and Jobs Act continued to fuel public projects such as highways and bridges, and the CHIPS and Science Act spurred data center and manufacturing construction. Meanwhile, the demand for multi-family buildings and offices has decreased.

These changing demands have had an impact on construction contracting.

For example, Derek Cunz, CEO of Minneapolis-based Mortensonsaid his company will hire more than 50 college graduates this year and make more than 500 hires with non-craft experience while increasing its full-time craft workforce to more than 4,000 to help deliver various projects. In particular, Cunz said he is bullish on energy storage, a sector in which Mortenson has more than 40 projects in its portfolio.

For contractors not in these booming sectors, labor shortages may remain strong. They not only compete with fellow construction workers for workers, but also against other industries that offer long-term jobs, such as manufacturing, warehousing and manufacturing.

Still, overall demand for construction workers may ease in the new year, according to Anirban Basu, chief economist at Associated Builders and Contractors.

“The construction labor market has weakened and may weaken further in 2025,” Basu said. “Not for everyone, not for contractors who have the benefit of participating in these ongoing megaprojects. But for many other contractors, 2025 will be the worst year for deal flow since the end of the pandemic. And that , of course, will have an impact on their personnel decisions.”

There is also a regional aspect to workforce trends, Basu said. In places like Arizona, Central Ohio, Texas, Georgia and Michigan, major constructions are draining communities of its capacity to deliver construction.

When the majority of the regional workforce is on a project, that also provides job security for those not working there, Basu said, since they have less competition for the remaining construction vacancies.

In the new year, projects in booming sectors will likely have few problems with staffing, and projects in softer sectors will struggle to fill positions or have to offer higher wages to compete.

Mega projects generate moderate wages

Experts told Construction Dive that they believe the multi-year nature of projects like massive data center campuses such as Meta’s $10 billion project in Monroe, Louisiana this will require 5,000 construction workers: They provide long-term job security that is attractive to workers, so they are willing to accept the trade-off of moderate wages.

Wages have stabilized as workers are drawn to larger projects, said Aaron Faulk, national construction practice leader at Seattle-based accounting firm Moss Adams.

By 2023, about 60 percent of construction companies said they changed their compensation structure, increasing salaries or benefits, according to a Moss Adams national survey of 274 companies. By 2024, the number of companies raising salaries dropped to 42 percent, Faulk said, indicating that competition was not as fierce as the year before.

He attributed this in part to the variability of the different construction sectors.

“Some segments are really strong right now, whether you look at data center or energy or industrial and manufacturing,” Faulk said. “Then there’s the weakness, albeit in the multifamily office. And so I think some of the contractors that are very busy have been able to get people without having to make massive compensation adjustments.”

Ongoing federal funding should continue to fuel civilian work and keep wages steady next year. The government has not yet rolled out all the funding for the major legislation, Faulk noted. Three years after the five-year federal law, 47%. IIJA funds have been announced.

Faulk said the federal funding would help keep compensation for workers in these jobs stable and “solid” compared to the past, when employers may have had to consider more frequent wage increases.

However, companies that actually work on these long-term projects are in the minority. A survey of members of the Associated General Contractors of America found that 18% of members have performed work on IIJA-funded projects, while another 5% have won IIJA-funded work but have not yet started Almost a third of respondents do not expect the law to change their portfolio.

At the same time, respondents said they expected 15 of 17 major sectors to increase spending in 2025 compared to 2024. While the highest expectations are based on sectors such as data centers and transportation, members of ‘AGC also predict growth in education, health and government buildings.

As a result, the vast majority of respondents said they intend to increase staffing and that securing the workforce for projects in 2025 is one of their top concerns and challenges for the year. And 53% of AGC’s 1,109 respondents increased base pay rates by 2024, 11% more than companies in Faulk’s survey.

Improving skills for the future

Regardless of the type of projects they work on, there are steps contractors can take to ensure they are the employer of choice in their markets. Upskilling workers and giving them the tools to fill in-demand positions is vital.

“This is phenomenally important,” Basu said of workforce training. “That’s how we create a larger middle class by exposing these less experienced construction workers to training programs, apprenticeship programs that allow them to develop more in-demand skills, whether it’s for carpentry, electrical work, HVAC, and so on.”

To get the projects done on time, these skills and experiences will be vital. Faulk said employers are planning accordingly.

“Every contractor has this problem where there are highly skilled people who typically leave the workforce because they’re aging. And how do you replace those people when there aren’t enough talented people to replace them? Faulk said. “It’s they focus on productivity and also train these people to get them up to speed as quickly as possible.”

In fact, Cunz said part of Mortenson’s plans to grow its full-time workforce include investing in training and growth opportunities.

The emerging workforce – made up mainly of Generation Z — It can be a good fit for the trades because of the disillusionment with paying for a four-year degree.

“The way I see it is that we’re really at an inflection point, where the Gen Z population is embracing this belief that if you want to be part of a growing industry and have career growth potential, job security and good earning potential, that The path can best be achieved by entering the trades,” Kit Dickinson, construction industry executive at ADP, told Construction Dive in October.

Experts say contractors should take note invest in technology, reverse mentoring and cultural changes to ensure workplaces are welcoming for all types of workers.

“What used to be kind of a nice to have, that we have to branch out and explore other generations and younger workers and so on, is now a necessity because there’s just too much work,” Dickinson said. “What keeps you up at night as an employer is attracting and retaining the skilled workforce needed to meet demands.”