Construction comes out of 2024 stronger, but labor shortages persist

The U.S. construction industry ended 2024 in a firmer footing, however skilled trades shortages were still a challenge, a report showed.

The Royal Institution of Chartered Surveyors and American Association of Cost Engineering said construction was in a stronger position at the end of 2024, according to the USA Construction Monitor report. Researchers credited the infrastructure, home and office sectors for growth in contracting activity.

The Construction Sentiment Index, made up of different key indicators, climbed to +40 in the last quarter, the report showed. Confidence was higher at the end of the year compared to +19 in the third quarter and +25 in the quarter before that. The report counted net balance data on a range from -100 to +100.

Infrastructure had an exceptionally strong +63% net balance figure, up from 34% in the third quarter, the report showed. Energy pulled the infrastructure subsector the most with a +69% figure for workloads. In 2024, the U.S. government invested in energy throughout the year with a wide array of construction projects involving renewables, batteries and nuclear facilities, researchers said.

Housing and office projects also saw growth last quarter, with private residential developments a net positive at +26% in the fourth quarter compared to +10% in the third quarter. Non-residential development, including offices, was at +31% compared to +8%, the report showed.

Clients showing interest in projects also picked up, which lead to better project expectations in the future, researchers said. Margins for confidence in profit entered a net balance of +4%, up from -13% in the third and second quarters of 2024, they added.

Despite the construction building in a positive direction, survey respondents noted that skilled trade and labor shortages continued to be a challenge. A New York said they were concerned about an aging workforce and the need to attract fresh talent in the industry, researchers said. Around 40% of built environment workers and professionals will retire within the next few years, researchers added.

In the report, nearly 70% of respondents said shortages of skilled trades were an obstacle for construction activity. The runner up was general labor shortages for nearly 60% of respondents, data from the monitor report showed.

“The U.S. construction economy continued to gain traction in the 4th quarter of 2024, with infrastructure projects fueling growth and project backlogs reaching their highest levels since 2022,” said Michael Kobylka II, the CEO of AACE, in a statement. “While US contractors are seeing strong demand, the ongoing skilled labor shortage remains a critical challenge that could impact future capacity. The data shows that the new administration’s policy agenda must address skilled workforce shortages in the US and control the cost of construction materials to sustain this momentum and meet the industry’s long-term needs.”