Do Home Builders Need More Labor or More Talent?

Commentary: As the residential construction community gathers in Orlando, who will leverage labor capacity constraint as a competitive advantage?

3 MIN READ
Image: Maggie Goldstone

Image: Maggie Goldstone

The latest jobs data from the Bureau of Labor Statistics, released this past Friday for the month of December 2017, headlined employment growth of 148,000 new payroll positions, and a net year-over-year gain of 2.055 million jobs, and a very low unemployment rate of 4.1%.

In construction–where we know a hangover of the Great Recession continues to weigh on total construction employment and labor capacity–the gains in December were noted by National Association of Home Builders senior economist Jing Fu, who also observes progress on a year-on-year front in construction and residential construction employment. Dr. Jing Fu writes:

Residential construction employment rose by 18,200 in December, after a 13,700 increase last month. The November increase was revised from its original estimate of a 14,800 increase. Residential construction employment is now 2.75 million, broken down as 781,000 builders and 1.97 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction is 9,917 a month. Over the last 12 months, home builders and remodelers have added 86,400 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 769,800 positions.

By all measures, that progress is slow, and is the cause of one of home building’s most challenging chronic questions: will residential construction employment reach a level where labor capacity is at equilibrium with demand for building? This gain of just under three-quarters of a million positions tracks back a decade to the nadir of the housing recession, prior to which residential construction employed more than 5 million in its heyday.

That leaves us 2.25 million employment positions short of the boom times, and the big question is–with the addition of investment in technology and automation into the construction process, assuming that will be a growing number–what’s the real shortage, and how, realistically, to address it?

A first step in addressing it, as Fletcher Groves points out here, is for firms to assume agency in the challenge, rather than to regard themselves as passive players in the dynamic. If a business model is clear regarding how the enterprise generates value and who makes money from the process of generating value, businesses would not leave themselves open to the risk of having a factor vary to the point of unpredictability or worse.

As you look around over the next few days in Orlando, and talk to builders and contractors–the heart and soul of residential construction–observe whether they’re saying access to skilled labor capacity is “a problem” or “their problem.” It’s an important distinction.

If employer firms regard the current constraint on their own capacity to deliver on their business models as an urgent matter for them to solve, rather than for somebody else to figure out, then those firms will thrive disproportionate to the rest.

At large, our view is that construction has a talent challenge, not a labor shortage. The right talent will engage market forces to gain competitive advantage over others, and will solve for constraints on resources using the ones at their disposal in more clever ways than the rest.

The question may not be, ‘how many people does it take to screw in a light-bulb?’ but rather, ‘how many light bulbs can be screwed in in the same three second time period?’

The constraints of labor, lots, and lending will not disappear. But make no mistake, the strategies, investments, and talent recruitment of some firms operating today are leveraging those constraints to their advantage as we speak.

One of the true delights of our role a BUILDER is to get this time each year to spend time with people who make up this population that represents 2.5% of our nation’s employed workforce: builders. It’s people who practice a trade, run businesses, provide society with value, and provide the economy with adrenaline.

Clearly, the nation can use more people just like you right now. So can your town or city.

About the Author

John McManus

John McManus is an award-winning editorial and digital content director for the Residential Group at Hanley Wood in Washington, DC. In addition to the Builder digital, print, and in-person editorial and programming portfolio, his accountability for the group includes strategic content direction for Affordable Housing Finance, Aquatics International, Big Builder, Custom Home, the Journal of Light Construction, Multifamily Executive, Pool & Spa News, Professional Deck Builder, ProSales, Remodeling, Replacement Contractor, and Tools of the Trade.

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