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Where is Our Industry Headed?

SIGNS ARE POINTING IN THE RIGHT DIRECTION

Earlier this year, AGC of America conducted a survey of its members, who have a ‘glass half full’ outlook for 2014, in spite of growing worker shortages, rising costs and federal budget cuts. Many firms plan to start hiring again and most contractors predict demand will either grow or remain stable in virtually every market segment this year.

“Contractors are more optimistic about 2014 than they have been in a long time,” says Stephen E. Sandherr, chief executive officer, AGC of America. “While the industry has a long way to go before it returns to the employment and activity levels it experienced in the middle of the last decade, conditions are heading in the right direction.”

The infographic highlights a few key elements from Optimism Returns: The 2014 Construction Industry Hiring and Business Outlook, which was based on survey results from more than 800 construction firms from every state and the District of Columbia. Contractors of every size answered more than 40 questions about their hiring, equipment purchasing and business plans. To access state-by-state, nationwide and regional results, click here.

HIRING
Forty-one percent of firms that did not change staff levels last year reported they plan to start expanding payrolls in 2014, while only 2 percent plan layoffs, a net positive of 39 percent. This follows a year where 51 percent of all responding firms reported they added staff while 23 percent reported making layoffs, a net positive of 28 percent. However, net hiring is likely to be relatively modest, with 86 percent of firms reporting they plan to hire 25 or fewer new employees this year.

Fortunately, the firms planning to start cutting staff in 2014 expect to make relatively modest changes to the size of their workforce. One hundred percent of those firms estimate their planned layoffs will amount to 15 or fewer positions being cut. Those layoffs would be smaller in scope than what occurred in 2013, when 34 percent of firms reported reducing staff by 16 or more people for the year.

Among the 19 states with large enough survey sample sizes, 100 percent of firms that did not change staffing levels last year in Utah, plan to start hiring new staff this year, more than in any other state.

EQUIPMENT
Many contractors also reported they plan to add new construction equipment in 2014. Specifically, 73 percent of firms plan to purchase construction equipment and 86 percent report they plan to lease it this year. The scope of those investments is likely to be somewhat limited, however. Forty-four percent of firms say they will invest $250,000 or less in equipment purchases and 53 percent say they will invest that amount or less for new equipment leases. At the beginning of 2013, only 64 percent of firms planned to purchase new construction equipment while 77 percent of responding firms planned to lease new equipment.

One reason firms may be more optimistic, association officials noted, is that credit conditions appear to have improved. Only 9 percent of firms report having a harder time getting bank loans, down from 13 percent in last year’s survey. And only 32 percent report customers’ projects were delayed or canceled because of tight credit conditions, compared with 40 percent a year ago.

REGIONAL ANALYSIS AND MARKET SEGMENTS
While the overall outlook for most market segments was generally positive, especially for private-sector markets, results varied considerably by region. In particular, contractors in the South were the most optimistic, compared to contractors in other regions, about 7 of the 11 market segments covered in this report. Meanwhile, contractors from the Northeast were the least optimistic in 8 out of 11 market segments.

Power
Contractors from the Midwest region were the most optimistic about demand for power construction in 2014. The optimists outnumbered the pessimists by 31 percent. Meanwhile contractors in the Northeast were the least optimistic, with a net difference of only 21 percent.

Manufacturing
Midwestern contractors were also the most optimistic about the outlook for manufacturing construction, with a net difference of 40 percent. Again, contractors in the Northeast were the least optimistic, with a net difference of 8 percent.

Hospital/Higher Education
Contractors from the South were the most optimistic about hospital and higher education construction, with a net difference of 30 percent, while Northeastern contractors were the least optimistic, with a net difference of 16 percent.

Retail, Warehouse and Lodging
The South also has the most optimists when it comes to the combined retail, warehouse and lodging segment. The net difference there was 34 percent, whereas the net difference in the Northeast was 12 percent.

Private Office
Southern contractors also feel the most optimistic about the private office market, topping the regions with a net difference of 40 percent. Again, contractors in the Northeast were the least optimistic, with a net difference of 14 percent.

Water and Sewer
The one market segment where contractors from the Northeast are the most optimistic is water and sewer construction. The net difference for contractors from that region was 30 percent. Meanwhile contractors in the Midwest were the least optimistic, with a net difference of only 13 percent.

Highway Construction
However, Southern contractors were the most optimistic about the 2014 outlook for highway construction market, with a net difference of 22 percent. Contractors from the West were the most pessimistic, with a net difference of -4 percent.

Transportation
Contractors from the South also were the most optimistic about other types of transportation construction, with a net difference of 17 percent. In marked contrast, the net difference was -21 percent in the Northeast.

K-12 Construction
The only region of the country where contractors had a positive outlook for K-12 construction was the South, where the net difference was 16 percent.

Public Building Construction
The South also has the most optimistic outlook for public building construction, with a net difference for that segment of 7 percent. The Northeast also has the most pessimistic contractors in this segment, with a net difference of -22 percent.

In addition to AGC of America’s Outlook survey results, ENR’s Construction Forecast Report 2014 indicates a similarly positive outlook, predicting an overall 9 percent increase in construction project starts this year, will all regions of the nation expecting growth.

This infographic highlights some of the key elements from AGC of America's Industry Hiring and Business Outlook Survey.

This infographic highlights some of the key elements from AGC of America’s Industry Hiring and Business Outlook Survey.