According to a recent survey of its members by the Associated General Contractors of California (AGC of California), most contractors in the golden state are feeling optimistic about the construction industry’s outlook and their companies’ financial and hiring prospects in 2023.
Over 58 per cent of respondents said they expect business activity in California to be strong or moderate in 2023.
More than 65 per cent expect their industry to stay the same size or to grow.
And about 49 per cent are optimistic about the overall state of the California construction industry.
“Comparing this year’s results to the results of our 2022 Optimism Survey, there are some similarities and some new downward trends,” said AGC of California CEO Peter Tateishi. “But the numbers are still good. Things are looking positive overall.”
According to survey results, nearly 56 per cent of respondents expect to increase the size of their workforce in 2023.
Nearly 58 per cent expect their 2023 revenue to increase either significantly (10.1 per cent), moderately (25.7 per cent) or slightly (22 per cent) in 2023.
At the same time, there are a few clouds on the California construction horizon.
“A few results are trending downward,” said Tateishi. “Our members’ biggest concern in 2023 is the possibility of a recession. That’s new this year. In 2022 they weren’t worried about a recession.
“After that, what’s most on their minds is labor force availability and regulations.”
Tateishi says there are three main reasons why the California construction industry is optimistic.
“There’s $100 billion in federal and state funding for infrastructure that’s been approved and needs to be spent within the next five years,” he said. “That funding isn’t going to disappear. That doesn’t include local spending. And that public infrastructure investment will drive spending in the private sector.”
Secondly, the LA Summer Olympics in 2028 will require a lot of construction in and around Los Angeles.
Tird, most AGC of California members have healthy backlogs of projects.
Looking outside the California state line to the country as a whole, construction contractors expect infrastructure and other public sector projects to continue to do well.
That’s according to the results of a national survey released recently by the Associated General Contractors of America.
At the same time, they expect some types of private construction to slow and labor shortages and supply chain constraints to continue.
The findings are detailed in High Hopes for Public Sector Funding Amid Workforce and Supply Chain Challenges: The 2023 Construction Hiring and Business Outlook.
“Contractors are optimistic about the construction outlook for 2023, although they are expecting very different market conditions for the coming year than last year,” said AGC CEO Stephen Sandherr in an announcement. “Even as market demand evolves, contractors will continue to be confronted with many of the challenges they faced in 2022, including the impacts of supply chain problems and labor shortages.”
The net reading, the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink, is positive for 14 of the 17 categories of construction covered in the survey.
Respondents are most optimistic about infrastructure spending. There were net positive readings of 42 per cent for both highway and bridge construction and transportation projects.
Contractors are almost as upbeat about sewer and water construction and federal projects.
There are also great expectations for power projects and health care, such as clinics, testing facilities and medical labs.
In addition, there is a positive outlook for hospital projects, public buildings and the education sector.
Respondents are less confident about growth prospects than they were in 2022, however.
The steepest downturn in expectations is in multifamily and warehouse construction.
The outlook for lodging construction slipped from modestly positive a year ago to negative.
More than two-thirds of survey respondents expect to add to their worker headcount, compared to only 11 per cent who expect a decrease.
Eighteen per cent of respondents say their headcount will grow by 11 per cent to 25 per cent; five per cent anticipate an increase of more than 25 per cent.
At the same time, 80 per cent report they are having difficulty filling some or all salaried or hourly craft positions, compared to only eight per cent who say they are having no difficulty.
AGC says workforce shortages likely explain why nearly three-quarters of firms increased base pay rates over 2021.
One-third of firms provided incentives or bonuses and more than one-quarter increased their portion of benefit contributions and/or improved employee benefits.
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