For the past few years, the news regarding residential and commercial construction in New York has been good. The construction industry, in general, started to benefit from the economic recovery, and we started to see new projects popping up all over the place.
However, as industry growth in New York started hitting record levels, the fears of a labor shortage loomed. Now delayed projects and frightening labor statistics show that maybe New York City got in over its head with the recent rash of new construction.
Is The Scene Set For Labor Shortage?
The Commercial Observer noted in February 2016 that downtown New York City hotels, which had been seeing a significant boost in construction for the past several years, may have reached a point of critical mass. While the numbers for room occupancy are up from previous years, the overall growth of the hotel industry has slowed because there are simply too many rooms.
Room rates are dropping for some hotels, and the future does not look promising with more projects currently underway and others in the planning stages. So, if the hotel industry is starting to see ill effects from the over-exposure of New York’s construction boom, then it stands to reason that the workers are next.
Possible Cause Of Jobs Disappearing
In 2015, the Buffalo News reported that employment levels for all of the area’s trade unions were at an all-time high, and those numbers have continued into 2016. While that should be a reason to celebrate, it is actually causing concern because the primary general contractors and subcontractors are so busy that there is no company there to pick up new work.
Developers in the area are concerned that the overworked contractors cannot handle new projects, and many developers are backing off new projects for the future. The result is that hiring for the unions has slowed down, and the job prospects for the area’s construction industry may actually be going backward.
It Is A National Trend
It has been reported that the construction industry lost 15,000 jobs in the month of May 2016. The month prior to this, it was recorded that a projected 1,000 job increase actually turned into a near 5,000 job loss. How is the construction industry losing jobs? The numbers need to be taken in context, and the reason is very similar to what is going on in Buffalo.
In May, there were 6,645,000 construction workers employed in the United States. Despite the loss of 15,000 jobs, that number is still 3.4 percent more than the number of construction workers employed in 2015. Nonetheless, it is the downward trend that is concerning developers and causing delayed projects to suddenly get shelved.
The Stark Reality Of Contracting
The contracting industry works based on projections. When a developer plans a project, it can take months to get the numbers right. There are only so many qualified skilled workers and laborers available to work, and the industry currently has almost every single qualified worker available working on projects. A busy construction industry is a successful one, but as the labor statistics start to get released for current months, it appears that the construction industry is going to face a labor shortage.
As general contractors take on more projects, they start to look for subcontractors to help get the work done. The subcontractors have run out of people to hire, so they can no longer help general contractors to meet the demands of the developers. In some cases, developers are shelving projects which in turn forces general and subcontractors to let workers go.
The entire vicious circle will likely keep going until either the construction industry finds a way to meet its labor needs, or developers are willing to extend the completion dates for their projects. For now, it looks as though the construction industry is a victim of its own success, and that success has started to put thousands of workers in unemployment lines.
The irony of this situation is that this is one of the most successful periods for the construction industry in its history, and sending workers to the unemployment lines when the workload is overwhelming is something that does not bode well for the industry’s immediate future.