ABC: Construction Industry Must Attract 439,000 Workers in 2025
The construction industry will need to attract an estimated 439,000 net new workers in 2025 to balance supply and demand based on a model developed by the Associated Builders and Contractors.
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ABC’s proprietary model uses the historical relationship between inflation-adjusted construction spending growth, sourced from the U.S. Census Bureau’s Construction Put in Place Survey, and payroll construction employment, sourced from the U.S. Bureau of Labor Statistics, to convert anticipated increases in construction outlays into demand for construction workers at a rate of approximately 3,550 jobs per billion dollars of additional spending.
In addition, the model also incorporates the current level of job openings, unemployment and projected industry retirements and exits into its computations.
ABC Chief Economist Anirban Basu noted that while the construction workforce is getting younger and more plentiful in recent years, it must grow in 2025 to continue to meet the demands.
Per the model, the industry will need to bring in 499,000 new workers in 2026 as spending continues to pick up in response to the presumed reduced interest rates.
“If it fails to do so, industrywide labor cost escalation will accelerate, exacerbating already high construction costs and reducing the volume of work that is financially feasible,” Basu said. “Average hourly earnings throughout the industry are up 4.4% over the past 12 months, significantly outpacing earnings growth across all industries.”
Compared to recent years, he said this represents improved labor availability, which can be traced to two primary factors.
First, Basu said construction spending is expected to grow at its slowest pace in years throughout 2025, especially in interest rate-sensitive segments like homebuilding. He noted that Interest rates will remain elevated in 2025 before it is likely to begin to dip next year.
Second, the industrywide workforce has become significantly younger over the past several quarters, with the median construction worker now younger than 42 for the first time since 2011. As a result, the pace of retirements is expected to slow this year.
“Despite that improvement, contractors will struggle to fill open positions,” Basu said. “This will be especially true in areas where manufacturing and data center megaprojects are underway.”
Also, he said more than $1 in every $5 spent on non-residential construction currently goes toward manufacturing projects, and those projects are absorbing a significant share of the labor force in their respective regions.
“The U.S. construction industry’s efforts to hire more workers to replace retirees and meet the demand for new construction projects gained momentum in 2024,” said Michael Bellaman, ABC president and CEO. “That is fantastic news, but we still have a long way to go to shore up the talent pipeline”
He said the data on the number of young people choosing a career in construction suggests that employing practical technology and innovation in educational programs and on jobsites helps maximize the productivity and efficiency of the construction workforce.
“ABC’s all-of-the-above workforce development strategy is working to draw new entrants into the industry through hundreds of entry points and upskill them through both industry-driven and government-registered apprenticeship programs,” Bellaman said.
However, Basu pointed out that there are factors that could render his model overly conservative, meaning worker shortages could be more severe than forecast.
“While the consensus forecast has construction spending increasing by less than 3% in 2025, that same forecast has underestimated growth by a significant margin during each of the past three years,” he said. “If inflation dissipates in coming months, borrowing costs will subside and construction volumes will increase. Faster-than-expected immigration over the past few years has also bolstered labor supply, and potential changes to immigration policy will likely constrain worker availability.”
Meanwhile, Bellaman added that another solution to address the shortage is a merit-based, market-based visa system. He said ABC’s goal is to work with the current administration and Congress to develop a visa system that allows people
“Another solution to addressing the shortage is a merit-based, market-based visa system,” said Bellaman. “ABC’s goal is to work with the Trump administration and Congress to create a visa system that allows people who want to contribute to society and work legally in the construction industry to do so. The construction industry thrives when all 8.3 million workers are given the opportunity to build America with fewer obstacles.”
CONTRACTOR SUPPLY MAGAZINE
The December 2024/January 2025 of Contractor Supply magazine is here!
Our cover story, A Diamond on the Rough, visits the family-owned Esch Construction Supply. Based in St. Paul, Minnesota, the company sells and services anything that will cut, grind, drill or polish concrete.
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