2020 CONSTRUCTION FORECAST


AGC’s 2020 Vision for California Construction: More Growth, More Challenges


By Ken Simonson, AGC of America Chief Economist C


ontractors experienced strong demand for projects in 2019. Much of that work will carry


over into 2020, and the economy is in good enough shape that firms will be booking new orders throughout the state. But unfavorable population trends and harmful trade policies may dim the outlook. By October 2019, construction


employment in California had climbed to 903,100, seasonally adjusted, a 4.0% increase over 12 months and the highest level since June 2007. (Seasonal adjustment removes the variation due to normal weather or holiday patterns so that underlying trends are more apparent and data can be compared across months.) Moreover, the increase was roughly


double the growth in construction employment nationally. Indeed, California contractors added workers at a faster rate than contractors nationwide for most of the past seven years.


Employment on the Rise Employment growth occurred


in nearly all parts of the state. From October 2018 to October 2019, construction employment increased in 21 of the 29 metro areas and divisions for which the Bureau of Labor Statistics reports such data, remained unchanged in four metros and declined in only four. October totals were at record levels


in eight metros, in series dating back to 1990 in most cases. (Metro data is not seasonally adjusted, which means numbers for one month should not be compared to months that typically have different patterns of construction


20 January/February 2020


employment.) Employment increases


were well balanced among different types of contractors. Employment increased by 5.8% (not seasonally adjusted) between October 2018 and October 2019 among residential building contractors; 4.5% at nonresidential building construction firms (general contractors); 6.5% in highway, street and bridge construction; and 3.6% for all specialty trade contractors combined. Nonresidential building construction set a record for employment in October for the third consecutive year.


Widespread Optimism Optimism about the coming year


is widespread. In a workforce survey that AGC of America released in late August, 77% of the 85 contractors who listed California as their primary state said they expect their firms to hire hourly craft personnel for expansion in the next 12 months, compared with only 11% who expect headcount to shrink. (Te remaining 12% anticipate no change in headcount.) However, finding those workers


will not be easy. More than two-thirds (68%) of the California-based respon-


Optimism about the coming year is widespread in


California, according to an AGC survey.


dents said they were having a hard time filling hourly craft positions. Nearly as many (61%) said the same about salaried positions. Looking ahead, similar shares of California respondents said it will be as hard or harder to hire hourly craft personnel (67%) or salaried personnel (56%) in the coming 12 months.


One reason for the difficulty in


filling positions is the inadequate training pipeline for craft personnel. Four out of five California respondents rated the local pipeline as poor or fair.


California’s Workforce Challenge


All of these survey results are


similar to the percentages for the full national sample of nearly 2,000 responses. But California contractors face an additional workforce challenge: the exodus of potential workers from the state. Extremely expensive housing,


intolerable commutes and difficult conditions for starting or operating a business have driven out many working-age individuals. Te frequent wildfires, power outages and other natural and manmade disruptions to normal life may have contributed to the outmigration. Whatever the causes, the state’s


population growth rate has slowed by more than half in only three years, from 0.85% in 2015 (more than the 0.74% national growth rate that year) to just 0.40% in 2018 (less than the national rate). While the state’s population increased by nearly 158,000 between July 2017 and July 2018, that


California Constructor


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