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Labor Shortage in the Construction Industry Hits Contractors

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Construction labor requirement

Building a structure requires a lot of people with specific skill sets such as concrete preparation, framing, electricity, and plumbing. A shortage of skilled labor is affecting contractors and in some cases delaying their projects as well.

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Labor shortage

According to the data from the US Bureau of Labor Statistics, construction employment totaled 6.388 million in August, which was the highest level since February 2009. The number of unemployed workers who reported last working in construction totaled 474,000, the lowest since 2001.

August employment rose by only 3,000 compared to an average of 9,900 per month over the first seven months of the year. This is much lower than the monthly average of 18,250 between August 2014 and August 2015. The construction sector’s unemployment rate increased to 6.1% in August after declining consecutively during the past five months.

Why is there a labor shortage?

The labor shortage in the construction sector can be attributed to many factors. Prime among them is that workers who lost their jobs during the housing crash have moved to other sectors in search of better opportunities. In addition, many workers have retired or are now retiring and new workers are hard to come by, as they are finding lucrative opportunities elsewhere.

Implications

The lack of experienced construction workers may result in a delay in launching and completing new projects, curtailing the supply of properties. The decline in property supply could lead to higher prices if demand remains strong. Normally, REITs are continuously looking to acquire properties to boost their revenue. The REITs such as Simon Property Group (SPG), Boston Property (BXP), Equity Residential (EQR), and Public Storage (PSA) are often aggressive buyers in the property market. Boston Properties (BXP) forms 4.57% of the iShares Cohen & Steers REIT ETF (ICF).

In the next part of the series, we will discuss the dividend yield of REITs.

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