ICBA ECONOMICS: Snapshot of Labour Supply Challenges in the U.S. Construction Industry

By Jock Finlayson, ICBA Chief Economist

Over the past few years, the Canadian construction industry has been grappling with labour shortages, escalating payroll costs, and growing numbers of retiring workers. It may come as a small consolation to know that our colleagues in the United States are facing similar challenges. The title of a new report from the Rand Corporation think tank summarizes the state of and trends in the U.S. construction job market: “Construction Apprenticeships Will Fail to Meet Projected Needs”.

Overall, America’s construction industry is enjoying good times. In the first half of 2024, total U.S. construction spending was running roughly 16% above the year-earlier level, with manufacturing facility construction posting big gains and residential construction also showing strength. Lower interest rates and some lessening of inflation pressures are helping to underpin the recent surge in construction spending. Substantial U.S. government investments in sectors ranging from semi-conductors to green energy, electric vehicle and battery manufacturing, and other “clean” technologies have stimulated significant new energy- and manufacturing-related construction spending across many American states since 2021.

As the Rand researchers note, “this growth in construction activity has led to an increase in demand for construction workers as the sector struggles to keep pace with expanding project pipelines.” Various indicators point to an unusually tight job market for the U.S. industry. Figure 1 plots the number of unemployed construction workers on the left vertical axis and the percentage increase in construction wages on the right vertical axis. Unemployment in the industry sits at a record low, while the median construction hourly wage has been rising at a 5-6% clip (annualized) since late 2022.

Figure 1:

Forecasters predict strong demand for construction workers continuing in most segments of the industry – both in the next 1-2 years, as well as over the coming decade. One leading U.S. industry group sees a need for an extra 500,000 construction workers in 2025, over and above the level of “typical” hiring in the industry. The U.S. Bureau of Labor Statistics expects 500,000 annual construction job openings through 2033. In percentage terms, electricians, heating/ventilation/air conditioning mechanics and installers, plumbers, and construction labourers are among the occupational groupings projected to have the most job openings. These openings reflect a mix of retirements among current U.S. construction workers along with the demand for additional labour stemming from economic, industrial and population growth.

Within the U.S. construction sector, the primary source of workers hired to fill vacant positions is the industry’s existing workforce. According to the Rand analysis, this pool is essentially exhausted, putting pressure on the industry to attract “new” labour market entrants. The latter include immigrants, graduates of U.S. education programs, and those completing apprenticeship programs. Some 3 million students graduate from American high schools each year. Of these, around 1.1 million do not immediately go on to college or university. Apprenticeship training programs tend to draw disproportionately from this non-college bound segment of recent high school graduates.

More than one-fifth of the U.S. construction workforce is foreign-born; among those directly involved in trades-related work, the figure exceeds 30%. Construction trades particularly reliant on immigrants include drywallers and tile installers (52%); painters (48%); roofers (48%); flooring installers (46%); stonemasons (37%); and carpenters (33%). Immigrants also account for four in ten construction labourers. Projections show the share of immigrants in the construction workforce rising steadily as the U.S.-born population ages and the ranks of retiring workers swell.

However, as is also the case in Canada, U.S. immigration policy does not put a priority on construction occupations and industry-relevant skills in granting either work visas or permanent residency. In addition, the incoming administration of President-elect Donald Trump does not seem inclined to expand immigration – and has signalled a determination to deport millions of “unauthorized” foreigners, including those who are employed. This pledge presumably extends to “unauthorized immigrants” working in construction jobs. Against this backdrop, it is unclear to what extent immigrants will be able to help fill job openings in the U.S. construction sector going forward. With the U.S. economy expected to continue growing and the supply of workers likely to come under downward pressure, the American construction industry is looking at several more years of worker and skill shortages.