For those under the age of 24, a career in construction is an unlikely reality and an even rarer goal. According to the Wall Street Journal, many parents these days may feel they have failed their child if they do not receive a college education.
However, the reality is that the construction industry is suffering from a lack of labor, particularly young labor. Recent data from the National Association of Home Builders shows a job opening increase in June with 263,000 openings, a post-Great Recession high. Although layoffs have seen a decrease, hiring rates remains the same despite a growing demand for construction.
In June, the construction industry saw a 3.5 percent increase to its open position rate (job openings as a percentage of total employment plus current job openings). During the post-recession building boom, the open position rate peaked at just below 2.7 percent.
The real estate industry has undergone a significant demand for supply in the previous months, and construction companies are struggling to keep up. Single-family home starts in 2017 were under pre-recession levels, only reaching 63 percent of the average starts that took place from 2000 to 2003. When construction companies are unable to produce at the rate of market demand, buyers are stuck with growing median home prices.
“Homebuilders, facing higher costs and labor shortages, are simply not producing enough affordable homes to satisfy demand,” said Lawrence Yun, NAR chief economist.
The housing shortage is reaching significant levels in metro areas. NAR uses a monthly housing tracker index that compares number of permits issued compared to number of new construction jobs to determine which metro areas are struggling the most. Topping the top 10 list is New York, with an index of 14.8. Although New York is first, out of the top 10, seven cities are in California. In Chicago, housing supply is trending upwards with an index of 6.1.
The return of vocational training programs in high schools may bring some hope to the construction industries lack of young workers. Allowing students to take courses and pursue internships in construction has already brought about some success.
Increasing wages for construction workers could bring more growth, but due to land, material and regulatory costs the industry is already financially tight.