Takeaways from the Fall Construction Labor Report

While the overall labor market is slowing and demand for construction labor has softened, the skilled labor shortage remains a significant challenge for the industry. The demand for construction will re-accelerate in the long-run as single-family construction and remodeling activity pick up and the need for additional workers will become more pronounced.

As part of the Fall 2024 Home Builders Institute (HBI) Construction Labor Market Report, the HBI highlights the state of the current labor shortage, shifts in demographics in the construction industry, and how labor productivity growth is essential to both economic gains and wage growth.

The report includes high-level findings, data, trends, and demand projections for construction labor:

Younger workers in construction are on the rise. According to the HBI, workers under the age of 25 now represent 10.8% of the construction workforce, up from 9% as recently as 2015. Analysis reveals that Gen Z—those born between the mid 1990s and early 2010s—are more likely to enter the construction industry than Millennials. Such individuals are drawn to the industry due to numerous factors, including innovative construction technologies, the high cost of four-year college education, competitive wages in construction, job security, and the potential for growth.

The share of younger workers in construction is a welcome development, as the proportion of workers in construction 55 or older is 21.8%. Workers aged 34 to 54 represent 67.3% of the construction workforce, down from 71.8% as recently as 2015.

Construction is still facing an aging labor market. Even as the slowing housing market has eased some pressure on the labor market, attracting skilled labor from younger generations is of paramount importance given the overall age of the construction workforce. The median age of construction workers is 42, a year older than the typical worker in the national labor force, according to the report. Around 66.9% of the construction workforce were Millennials and Gen Xers. However, the relative gain of the share of Gen X construction workforce is likely due to Baby Boomer construction workers reaching retirement age. The share of Baby Boomers in the industry is 16.2%, with the potential to decline further as more of the generation reaches retirement age.

The industry still needs to hire 723,000 workers per year. Demand for new construction has been weaker than it was in 2020 and 2021. Even with the softer demand, the NAHB and HBI estimate the annual number of occupational openings in construction totals approximately 723,000 a year. The number is determined by estimating the required net growth in employment due to construction expansion plus workers required to replace individuals who leave the sector permanently. Over the course of 2024 to 2026, this total represents a need for an additional 2.17 million adjusted net hires. Broken down to the specific trade, this number includes approximately 9,100 carpenters per year and 8,000 electricians per year.

Positive trends on diversity in the industry across gender and race. The number of women employed in the construction industry increased to around 1.3 million in 2023, representing 10.8% of the construction workforce. This is a large jump from 9.1% as recently as 2017. According to an analysis of Current Population Survey data, most women in the industry are employed in occupations such as office and administrative support, management, business, and financial operations. Women accounted for 66% of workers in sales and office occupations in 2023, according to the report. The HBI notes that women only comprise 4% of construction and maintenance occupations. According to the organization, “bringing additional women into the high demand construction trades represents a potential opportunity for the future.”

Diversifying the labor force is a strategic goal for construction given the scope of the shortage, and improvements are being made, according to the HBI. While Non-Hispanic Whites account for 57.5% of the industry according to the 2022 American Community Survey, Hispanics account for nearly a third of the industry. The share of Hispanic workers in the industry was just 23.6% as recently as 2010 and the count of Hispanic workers in the industry increased by 1.2 million in the twelve year period from 2010 to 2022. The share of African Americans and Asians in construction are substantially smaller, though, at 5.1% and 1.8%, respectively. The underrepresentation of African American and Asian workers in the workforce is also an opportunity area for the construction sector.

The rise of white-collar jobs in construction. According to the HIB, the makeup of the construction labor force has dramatically shifted over the past two decades. While the overall count of workers is approaching historic highs, the share of tradesmen has declined from 71% in 2005 to 61% in 2022. At the same time, the share of computer, engineering, and science occupations doubled, and the share of management and business occupations increased 60%. The HBI says the trends are noteworthy, particularly given a focus on the flat productivity growth rate in the construction sector.

“A growing count of engineering/tech workers would, on its face, suggest a boost to productivity. However, a decline for the share of workers associated with trades could suggest declining productivity,” the HBI writes in its 2024 Fall report. “These findings and possible impacts deserve additional research attention given the need to supply more attainable housing to the market.”

The full Fall 2024 HBI Construction Labor Market Report is available here.