Economic Fallout

Labor Shortages? Not So Much Today

by Steve Kaelble

What a difference a few months can make in construction.

Not long ago, industry analysts were warning of industrial construction labor shortages, at least within certain trades.

It’s no surprise to learn that they’re singing a different tune now that the economy is in the tank.

But they fully expect to pick up the refrain again down the road, because the underlying dynamics that had them concerned about shortages are not going away.

Industrial Construction Spurs Report

It was the 2008 Construction Industry Conditions Survey, sponsored by The Association of Union Constructors in Arlington, Va., and the North American Contractors Association in Charlotte, N.C., that sounded the alarm about labor shortages.

Released in May, the survey found that two-thirds of craftworkers have experienced some type of labor shortages. Schedules of more than 40 hours a week were commonplace, and an increasing number of contractors were earning travel payments.

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“In August, September, even October, I would have said that the supply of some skilled crafts was tight, and we anticipated it being even tighter,” says Dewey Pearman, executive director of the Portage, Ind.-based Construction Advancement Foundation, an organization promoting union-backed construction.

As Halloween approached, however, the economic picture grew a lot scarier, as much of the work was quickly drying up.

“We’ve started to see projects delayed, canceled or put on hold,” says Steve Lindauer, president of TAUC.

For one thing, work for the automotive sector has taken a big hit, he says.

“In Michigan, many of our people are unemployed,” Lindauer says. “Now we’re seeing it more pronounced in other sectors.”

Steel is one of those sectors, which is having an impact in Pearman’s part of the Midwest, a hub of steelmaking activity.

“The demand for steel fell, steel prices fell and capital and maintenance work at steel companies went from high to almost zero,” he says. “The mills called contractors and said that work is coming to a stop, and all of the union halls were suddenly filled with out-of-work craftsmen.”

Tom Felton, president of St. Louis-based MC Industrial, which handles industrial work as part of contracting-firm McCarthy Building Cos., agrees that the steel industry seems to be hardest hit right now.

“Companies seem to be taking a defensive mode, stopping projects or drastically slowing down projects to preserve cash,” he adds. “Projects you thought you were going to be working on today may be stopped tomorrow or next week.”

Two other sectors that had been hot were oil refining and power plants, where projects could easily carry price tags surpassing $1 billion, Lindauer says. He has heard reports of work stoppages in both sectors.

Some Projects Still Going That’s not to say that all has been lost.

For example, Felton says the nearly $1-billion Holcim (US) Inc. cement plant along the Mississippi River in St. Genevieve County, Mo., remains on track for completion this year. And Pearman points to the ongoing $3.8 billion project at the BP refinery in Whiting, Ind.

As a result, there may be pockets of shortages here and there, particularly in the Midwest and Ohio Valley and in certain trades, analysts say.

The earlier labor report had singled out boilermakers, pipefitters and ironworkers as especially tight areas.

“Those all have significant welding experience, and welding is one of the highest-demand skills out there now,” Lindauer says.

Grim as the industry’s prognosis seems at the moment, these observers won’t be surprised if the talk of widespread labor shortages returns in the not-too-distant future. That’s because the factors behind the trend—particularly the pending retirement of skilled workers and the need for both capital projects and industrial maintenance work—remain in place.

At some point, the economy will heal and many of the projects that have been put on the back burner will still need to be completed.

“The demand for these projects is not going away; they’re just getting deferred due to financial issues,” Felton says. “We’ll still have the same issue of declining numbers of workers in the trades—that’s going to continue.”

To handle the labor issue in the near term, “there are a lot of effective programs being launched and under way at various local areas,” Lindauer says, referring to apprenticeship initiatives and related programs. “But it doesn’t appear that on the national level there’s a strategy. It would be well for us as union contractors to join with our union partners to strategize.”

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