The construction industry in 2024 has experienced significant shifts in recruitment, retention, and training practices. These changes are driven by varying demands across different construction sectors, challenges in staffing, compensation trends, and the critical need for upskilling the workforce. This article delves into these dynamics and explores the anticipated trends for 2025.
Variations in Demand Across Construction Sectors
Public Projects vs. Private Building Initiatives
In 2024, the construction industry saw diverse levels of demand based on specific sectors. Federal funding from the Infrastructure Investments and Jobs Act (IIJA) and the CHIPS and Science Act has led to a boom in public projects such as highways, bridges, and data centers. These projects have flourished, providing ample opportunities for construction firms engaged in these sectors. The influx of federal funding has fueled substantial growth in public projects, leading to a surge in employment opportunities for those firms involved in large-scale infrastructure developments.
Conversely, the demand for multifamily and office buildings has diminished. Prolonged high-interest rates have stalled private building initiatives, leading to a slowdown in these areas. This shift can be attributed to higher borrowing costs, making it more challenging for developers to secure financing for new projects. Consequently, construction firms focusing on private sector projects have faced a more competitive job market. They have had to navigate through economic uncertainties and adjust their strategies to cope with reduced demand and a tighter labor market.
Impact on Hiring Trends
The fluctuating demand across construction sectors has created a complex hiring landscape. Contractors involved in public projects have managed to attract workers without dramatic changes in compensation. However, those not operating in these booming sectors face steep labor shortages. These contractors find it difficult to secure skilled workers without offering competitive wages, as they are competing with industries such as industrial, warehousing, and manufacturing, which offer longer-term job security. This competition for talent has exacerbated the recruitment challenges faced by construction firms operating in less thriving sectors.
The labor market’s tightness is further intensified by demographic changes, including an aging workforce and less interest in construction jobs from younger generations. Construction firms have increasingly turned to alternative recruitment strategies, such as hiring college graduates and experienced noncraft individuals, to address these labor shortages. Training and upskilling initiatives have become paramount to ensuring that new hires can quickly adapt to the demands of the industry. These combined efforts highlight the need for a multifaceted approach to recruitment and workforce development in the evolving construction landscape.
Recruitment and Staffing Challenges
Strategies for Recruitment
Derek Cunz, CEO of Minneapolis-based Mortenson, shared that his firm is actively hiring college graduates and experienced noncraft individuals while expanding its craft workforce to meet various project demands, particularly in the energy storage sector. This strategy highlights the importance of diversifying recruitment efforts to address specific project needs. By targeting a broader pool of candidates, Mortenson aims to mitigate labor shortages and enhance its workforce’s versatility, ensuring it can adapt to evolving industry requirements and capitalize on new opportunities.
However, contractors not operating in booming sectors face steep labor shortages, making it challenging to attract and retain skilled workers. Competing with peers and other industries for talent has compelled these firms to explore innovative hiring practices and consider different employment models. These firms often must offer more attractive benefits and training opportunities to remain competitive in the labor market. This includes providing career advancement prospects, flexible working conditions, and supportive work environments to attract potential employees seeking stability and growth.
Regional Disparities in Staffing
Anirban Basu, the chief economist for Associated Builders and Contractors, noted that the overall demand for construction workers might decline in 2025, especially for contractors outside the ongoing megaprojects. He predicts that for many contractors, 2025 could be the worst year for deal flow since the end of the pandemic, significantly affecting their staffing decisions. As a result, firms may need to adopt more aggressive recruitment strategies or diversify their project portfolios to ensure a steady workload and stable workforce throughout the year.
Basu further highlighted regional disparities in staffing trends. In states like Arizona, central Ohio, Texas, Georgia, and Michigan, large-scale projects are depleting the local construction delivery capacity. Consequently, workers not engaged in these major projects enjoy job security due to less competition for existing job openings. This creates a contrasting scenario where some regions struggle with labor shortages, while others experience relative stability in their workforce availability. These regional disparities necessitate tailored recruitment and retention strategies that consider the specific demands and challenges of each locale.
Compensation Trends
Stability in Wages
Experts within the industry note that megaprojects, such as the $10 billion Meta data center in Monroe, Louisiana, which demands 5,000 construction workers, offer long-term job security that appeals to workers despite moderate wages. These projects provide an assurance of prolonged employment, making them attractive to workers seeking stability rather than immediate high pay. Aaron Faulk, national construction practice leader for Moss Adams, observed that salaries have stabilized as a result. As firms recognize the value of offering job security, the emphasis shifts from merely competitive wages to providing long-term employment opportunities and professional growth.
A Moss Adams survey revealed that in 2023, 60% of construction firms altered their compensation structures, whereas in 2024, only 42% reported increasing salaries, indicating a less competitive landscape. This trend suggests that while compensation remains an important factor, job security and project stability are becoming more significant in attracting workers. As large-scale projects promise ongoing employment, workers are willing to accept stable wages in exchange for long-term stability and benefits, making recruitment in these sectors relatively more manageable.
Sector-Specific Compensation Trends
The variability in different construction sectors is a notable factor. Sectors like data centers, energy, and manufacturing remain strong, yielding steady job opportunities, while multifamily and office construction show weakness, reflecting reduced demand. Contractors in busier sectors have managed to attract workers without dramatic compensation changes by leveraging the appeal of stable and long-term projects. Federal funding continues to sustain civil work, maintaining steady wages, which is crucial for sectors heavily reliant on public infrastructure projects.
Significant multiyear federal projects funded by the IIJA are still in progress, ensuring ongoing stability in worker compensation. This stability is critical in maintaining a robust workforce in the construction industry, especially as the demand for skilled labor continues to evolve. Publicly funded projects provide a buffer against economic fluctuations, aiding contractors in offering consistent employment and fostering a reliable workforce committed to long-term industry involvement. As the construction landscape continues to adapt, the emphasis on balancing competitive compensation with job security remains paramount.
Federal Funding and Its Impact
Ongoing Federal Projects
Three years into the five-year IIJA, only 47% of the funds have been released, implying continued funding and stability in the construction sector. Despite this, few contractors reportedly work on these federal projects. A survey by the Associated General Contractors of America found that only 18% of their members had participated in IIJA-funded projects, with another 5% having won IIJA-funded work yet to start. This indicates that a significant portion of available federal funds remains untapped by many contractors, pointing to a potential area of growth and opportunity as more projects come to fruition.
Nonetheless, 2025 is expected to see increased spending across 15 of 17 major sectors compared to 2024, with notable growth anticipated in data centers, transportation, education, healthcare, and government buildings. This anticipated growth underscores the importance of federal funding in sustaining the construction industry’s momentum. As more funds are released and projects are awarded, the demand for skilled labor will likely increase, prompting contractors to seek out new talent and invest in workforce development to meet the burgeoning project requirements.
Impact on Workforce Demand
The continued release of federal funds is expected to have a significant impact on workforce demand. Contractors engaged in federally funded projects benefit from consistent project pipelines, allowing for better workforce planning and stability. This ensures that workers have job security and opportunities for long-term employment, which can help mitigate some of the labor shortages experienced in other sectors. As more federal projects come online, the demand for skilled workers is anticipated to rise, compelling contractors to prioritize recruitment and training initiatives to build a capable workforce.
The influx of federal funding will likely lead to an increase in job opportunities across several sectors, including transportation, education, and healthcare. This surge necessitates that contractors enhance their recruitment efforts and focus on retaining skilled workers through competitive compensation, professional development opportunities, and supportive workplace environments. The continued emphasis on federal projects highlights the critical role that government funding plays in shaping the construction industry and addressing workforce challenges while promoting growth and stability.
Upskilling and Workforce Development
Training Initiatives and Apprenticeships
Regardless of the project type, contractors can ensure they are the employers of choice by investing in worker upskilling. Anirban Basu emphasized the importance of training programs and apprenticeships for less experienced construction workers to develop in-demand skills like carpentry, electrical work, and HVAC. This focus on skill development is critical as the industry faces a shortage of highly skilled workers due to aging professionals leaving the workforce. By creating robust training initiatives, construction firms can build a pipeline of skilled labor prepared to meet the demands of modern construction projects.
Employers recognize the need to enhance productivity and expedite the training of new workers to replace the outgoing skilled labor. Mortenson’s strategy includes investing in training and growth opportunities, aligning with broader industry trends. The emerging workforce, predominantly Gen Z, may find trades attractive due to growing disillusionment with the cost of four-year degrees and the promising career prospects in construction. This shift in workforce demographics underscores the necessity for the industry to adapt its recruitment and training strategies to better align with the preferences and needs of younger generations.
Attracting Younger Workers
Kit Dickinson from ADP highlighted that the Gen Z population sees trades as pathways to career growth, job security, and good income potential. He advised contractors to invest in technology, reverse mentoring, and cultural changes to make job sites more inclusive and attractive to younger workers. By fostering a supportive and innovative work environment, construction firms can appeal to the career aspirations of Gen Z employees, who value stability, growth opportunities, and a positive workplace culture.
Investing in technology not only enhances productivity but also resonates with younger workers who are accustomed to digital tools and prefer tech-savvy work environments. Reverse mentoring, where younger employees share their expertise with older colleagues, can create a collaborative and dynamic workplace culture. Such initiatives can bridge the generational gap, encouraging knowledge transfer and fostering a cohesive team atmosphere. Embracing these strategies ensures that construction firms remain competitive in attracting and retaining a new generation of skilled workers essential for the industry’s future growth.
Conclusion
In 2024, the construction industry has undergone significant changes in how it approaches recruitment, retention, and training. These shifts are largely influenced by varying demands across different sectors within the construction field, presenting notable staffing challenges. Compensation trends have also evolved, highlighting the industry’s need to adjust employee pay scales to remain competitive. One of the most impactful factors driving these changes is the urgent requirement to upskill the workforce to meet modern-day demands. This article examines these crucial dynamics in depth and looks ahead to predict the trends that are expected to shape the construction industry’s landscape in 2025. Analyzing these developments provides insight into how industry leaders and employers can better prepare for future demands, ensuring a skilled, well-compensated, and adequately staffed workforce. As the construction sector continues to evolve, addressing these key areas will be essential for sustainable growth and success in the coming years.
