Fleetowner Com Sites Fleetowner com Files Uploads 2015 01 Dirt
Fleetowner Com Sites Fleetowner com Files Uploads 2015 01 Dirt
Fleetowner Com Sites Fleetowner com Files Uploads 2015 01 Dirt
Fleetowner Com Sites Fleetowner com Files Uploads 2015 01 Dirt
Fleetowner Com Sites Fleetowner com Files Uploads 2015 01 Dirt

Construction boom could help and hinder trucking over time

Jan. 22, 2015
A new survey of 900 construction firms across 48 states and the District of Columbia by the Associated General Contractors of America (AGC) finds that 80% of them plan to expand their payrolls this year while only 7% expect to reduce headcounts – an indication, the trade group believes, that an increase in construction activity lays just around the economic bend.

"Contractors are extremely optimistic about the outlook for 2015," said Stephen Sandherr, the association's CEO, explained during a conference call with reports this week. "Indeed, if their predictions prove true, industry employment could expand this year by the most in a decade."

Yet this survey, conducted as part of Ready to Hire Again: The 2015 Construction Industry Hiring and Business Outlook, also indicated a variety of challenges face the construction industry, too, especially worker shortages and regulatory burdens.

[You can click here to read the survey results directly.]

Of particular concern for trucking is that the construction industry pulls from the same labor pool, with many potential driver candidates often opting for the building trade if work and better pay is available.

"Despite the overall optimism, some challenges remain for the industry," added Ken Simonson, the association's chief economist. "In particular, as construction firms continue to expand, they will continue to have a difficult time finding enough skilled construction workers."

Among respondents who are trying to hire workers, 87% told AGC they are having a hard time filling key professional and craft worker positions. In particular, 76% of contractors hiring right now said they are having a hard time finding qualified craft workers, while 62% say the same about professional positions such as project managers, supervisors and estimators.

Simonson noted that as the supply of construction workers tightens, compensation levels appear to be rising, with 51% of firms increasing base pay rates to retain construction professionals and 465 doing the same to retain skilled craft workers.

AGC added quarter of firms report they have improved their benefits packages to retain construction professionals, with one-in-five doing the same to retain craft workers.

That might force trucking firms to boost driver wages more – something already occurring across much of the industry.

But flipping back to the positive side of AGC’s report, a lot of potential construction activity is expected to occur in the U.S. this year. So how might trucking benefit from it?

For starters, AGC projects that increasing demand for private-sector construction should drive growth in 2015, with those contractors participating in the group’s survey indicating they are most optimistic about the retail/warehouse/lodging segment, with the difference between optimists and pessimists – the net positive reading – at 33%.

Contractors are also optimistic about the manufacturing, private office and energy construction segments, with net positive readings of 26%, 25% and 24% respectively, AGC added.

Finally, there’s some optimism regarding public sector construction segments, especially those segments that aren't entirely dependent on federal funding. Contractors gave the outlook for water and sewer construction a new positive of 24%, with the highway market a net positive reading of 16% percent and higher education at 15%.

A lot of that activity should generate more freight volumes for trucking, and when combined with low fuel prices, should offer a nice bottom-line boost as well, AGC’s Simonson told me by email.

“Obviously, truckers are getting a great break on costs [due to lower fuel expenses]  and trucks that haul dirt, construction equipment or debris, and concrete probably are among the most fuel-thirsty and thus getting the biggest savings per mile or load,” he pointed out.

Yet Simonson emphasized that demand effects on construction will be “asymmetrical” to a degree.

“The benefits to consumers and consuming businesses will be much more diffused – over time, geography and industries,” he pointed out.

And while it will all be a net positive for construction, it will occur over a two-year period so it won’t be immediate, Simonson added.

For truck manufacturers and dealerships, though, the expansion effort by contractors contains a big upside, as 79% of those surveyed by AGC said they plan to purchase new construction equipment in 2015, with 81% of them expecting to lease it.

Yet AGC cautioned that the scope of those investments is likely to be limited to a degree, with roughly two-thirds of firms that plan to buy or lease equipment reporting they will invest $250,000 or less.

Let’s see how all this pans out as the 2015 moves along.

About the Author

Sean Kilcarr 1 | Senior Editor

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