remodeling industry structure & labor trends · • remodeling contractors are rebounding...
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© P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Remodeling Industry Structure & Labor Trends
Abbe H. Will
Remodeling Futures ConferenceMarch 17, 2015
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Research Overview
• Remodeling contractors are rebounding strongly from the downturn, especially larger-scale firms
• The industry remains fragmented, but specialty contractors have been particularly successful in achieving scale economies
• Employment is still well below market peak, the construction workforce is aging, and shortages continue to be concerning
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The Number of General Remodelers Is Growing Steadily Overall
79.9
84.4
86.9 86.4
82.5
80.3 79.6 79.980.8
83.2
70.0
75.0
80.0
85.0
90.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:2
Number of Establishments with Payrolls (Thousands)
Note: Estimate for 2014:2 is preliminary.Source: US Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages.
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Payroll Employment Is Climbing Back Even More Quickly
289
310 306
284
248
235241
252
266
282
200
220
240
260
280
300
320
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of Payroll Employees at General Residential Remodeling Firms (Thousands)
Source: US Department of Labor, Bureau of Labor Statistics, Current Employment Statistics.
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Typical Firm Size is Once Again Above Decade Average
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Average Size of Firm Decade Average = 3.3
Average Number of Payroll Employees at General Residential Remodeling Firms
Sources: US Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages and Current Employment Statistics.
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Industry Became More Fragmented During Downturn
80.5
19.5
81.7
18.3
83.6
16.4
84.2
15.8
84.4
15.6
84.3
15.7
0102030405060708090
<5 5+Number of Employees
2007 2008 2009 2010 2011 2012
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Share of General Residential Remodeling Establishments by Employment Size (Percent)
Source: US Census Bureau, County Business Patterns.
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Homebuilders Have Contributed to Growing Fragmentation in the Remodeling Market
44.0
45.3
50.5 50.750.1
40
42
44
46
48
50
52
2008 2009 2010 2011 2012
Share of NAHB Single Family Homebuilders Reporting Residential Remodeling as a Secondary Activity (Percent)
Source: National Association of Home Builders Annual Member Censuses.
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Revenue Growth Among Larger Remodeling Firms Has Rebounded Strongly
-15
-10
-5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012 2013
Median Annual Change in Revenue for Qualified Remodeler Top 500 Firms (Percent)
Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes remodelers reporting revenue in any two consecutive years and ranking in the top 400 in at least one of those years.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 Remodelers.
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Average Job Size is Also Edging Back Up Toward Pre-Recession Levels
15.716.3
16.915.7
12.0 11.9 11.512.6
13.2
02468
1012141618
2005 2006 2007 2008 2009 2010 2011 2012 2013
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Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 Remodelers.
Median Average Job Size for Qualified Remodeler Top 500 Firms (Thousands of dollars)
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The Very Largest Firms Typically Outperform the Rest of the Top 500 By a Considerable Margin
3.9
0.72.1
-4.5-6.7
5.13.7
7.4
11.9
8.6
5.33.0
-4.8
-11.9
5.03.3
5.8
10.5
-15
-10
-5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012 2013
Top 100 Rest of Top 500
Median Annual Change in Revenue for Qualified Remodeler Top 500 Firms (Percent)
Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes firms reporting revenue in any two consecutive years. Top 100 (Rest of Top 500) firms were ranked 1-100 (101-500) in the first of those years.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 lists.
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Over Half of Top 100 Firms are Specialty Replacement Contractors
Top 100 Rank 101-500Average 2013 revenue (Millions) $45.4 $4.1Median 2013 revenue (Millions) $17.7 $3.5Median annual revenue growth 2012-13 (Percent) 11.9 10.5Share of specialty firms (Percent) 53.7 27.4Median number of jobs 1,664 245Median average job size (Thousands) $10.5 $13.4
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Comparison of Top 100 vs. Rest of Top 500 for Qualified Remodeler Top 500 Firms in 2012
Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes firms reporting revenue in 2012 and 2013. Top 100 (Rest of Top 500) firms were ranked 1-100 (101-500) in 2012.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 lists.
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ANTICIPATED UPDATES FROM 2012 ECONOMIC CENSUS RELEASE
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Benchmark Total Number of Contractors Serving the Remodeling Industry
Number of Remodelers Percent Change 2002 2007 2012 2002-07 2007-12
General ContractorsPayroll 82,900 77,900 -6.0 -8-11%?Self-Employed 127,200 156,700 23.2 -50%?
Subtotal 210,100 234,600 150,000? 11.7 -35%?Special Trade Contractors
Payroll 117, 200 139,500 19.0 -15-18%?Self-Employed 202,900 278,100 37.1 -50%?
Subtotal 320,100 417,600 250,000? 30.5 -40?Total 530,200 652,200 400,000? 23.0 -35-40%?
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Note: Includes self-employed remodeling contractors with annual revenues of at least $25,000. Source: JCHS estimates using unpublished tabulations from US Census Bureau, 2002 and 2007 Economic Census of Construction and NonemployerStatistics.
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Increased Concentration of the Remodeling Industry
1.42.1
3.3
5.2
2.53.4
5.2
7.9
012345678
Top 4 Top 8 Top 20 Top 50Remodeling Contractors
2002 2007 2012
Share of industry receipts for largest remodeling contractors (Percent)
Source: JCHS estimates using unpublished tabulations from the 2002 and 2007 Economic Census of Construction, US Census Bureau.
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Annual Failure Rates During Downturn & Recovery
17.419.8
17.2
11.1 11.8 10.7 10.4
0
5
10
15
20
25
2007-08 2008-09 2009-10 2010-11 2011-12
General Remodelers All Businesses
Share of Payroll Establishments No Longer in Operation (Percent)
Source: U.S. Census Bureau, Business Information Tracking Series.
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LABOR FORCE TRENDS
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Nearly a Third of Occupations in the Construction Industry are Not in Construction Trades
Construction Trades67.8%
Installation/ Maint. & Repair5.2%
Management11.5%
Office/ Admin Support5.4%
Transportation2.8%
Business/ Finance Operations
1.9%
Architecture/ Engineering1.3%
Sales1.0%
All Other3.0%
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Notes: The number of employed and unemployed workers in the construction industry was 10.0 million in 2013. Construction also includes extraction occupations.Source: JCHS tabulations of US Census Bureau, American Community Surveys.
Share of Construction Industry Labor Force
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The Construction Trades Workforce Differs from the Overall Labor Force in Several Key Areas
47.3
63.8
16.6
2.5
30.9 27.9
0
10
20
30
40
50
60
70
Women More than High SchoolEducation
Foreign-born
All Industries Construction Trades
Share of Labor Force in 2013 (Percent)
Notes: Data include all workers age 16 and over housed in non-group quarters who are employed or unemployed but available for and seeking work. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Survey.
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The Construction Labor Force Lost 1.5 Million Workers
8,263
6,764
01,0002,0003,0004,0005,0006,0007,0008,0009,000
2007 2013
Employed Unemployed
Number of Persons in the Construction Trades Labor Force (Thousands)
Notes: Data include all workers age 16 and over housed in non-group quarters. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Survey.
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After the Downturn, the Construction Trades Included a Much Smaller Share of Younger Workers
44.2
22.3
2.8
42.9
27.9
2.6
34.8
27.9
2.5
05
101520253035404550
Under Age 35 Foreign-Born Women
200220072013
Share of Construction Trades Labor Force (Percent)
Note: The number of employed and unemployed workers in the construction industry fell from 8.3 million in 2007 to 6.8 million in 2013. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Surveys.
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Immigrant Inflows Adjust Rapidly to the Changing Demands of the Construction Industry
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(e)
2014(e)
2015(e)
21
Annual Inflow of Immigrants to the Construction Labor Force (Thousands)
Notes: Estimated values (e) were calculated using NAHB’s regression equation based on single family housing starts. Housing starts for 2015 are a consensus average of forecasts from FannieMae, Moody’s Analytics, Mortgage Bankers Association, National Association of Home Builders, and National Association of Realtors ©.Source: NAHB Economics, Construction Immigrant Worker Flow, January 2015.
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Construction Labor Shortage Headlines Abound
• Where Have All the Construction Workers Gone? – Atlantic Monthly, February 13, 2015
• Construction Companies Face Ongoing Worker Shortage– Green Bay Press Gazette, January 23, 2015
• Skilled Labor Shortage Could Cause ‘Serious Problem' for Construction Industry within 18 months
– Baltimore Business Journal, June 23, 2014
• Skilled Worker Shortage Looms for U.S. Construction Firms– Reuters, January 21, 2014
• America's Skilled Trades Dilemma: Shortages Loom As Most-In-Demand Group Of Workers Ages
– Forbes, March 7, 2013
• Economists Say Millennials Should Consider Careers In Trades– NPR, All Things Considered, February 2, 2015
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Skilled Trades Continue to Top Most Difficult Positions to Fill in U.S.
1. Skilled Trades2. Restaurant & Hotel Staff3. Sales Representatives4. Teachers5. Drivers6. Accounting & Finance Staff7. Laborers8. IT Staff9. Engineers10. Nurses
23
Employers Reporting Most Difficult Positions to Fill in 2014
Source: ManpowerGroup, 2014 Talent Shortage Survey.
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Homebuilders Overwhelmingly Report Labor Shortages as Challenge in Today’s Market
0
10
20
30
40
50
60
LaborShortages
Cost ofMaterials
ConstructionFinancing
Lack ofDeveloped
Lots
ConsumerFinancing
GovernmentRegulation
24
Share of Homebuilders Reporting Challenges
Source: HanleyWood Metrostudy, 2015 Builder Labor Study.
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Construction Labor Shortage Worse Now Than During Boom
45 44
29
21
34
46
0
5
10
15
20
25
30
35
40
45
50
2004 2005 2006 2012 2013 2014
25
Share of Homebuilders Reporting Some or Serious Shortage in Labor Availability
Source: NAHB.
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Framing Workers Are Most Challenging to Find
0
10
20
30
40
50
60
70
80
26
Share of Homebuilders Reporting Positions that are Most Difficult to Fill
Source: HanleyWood Metrostudy, 2015 Builder Labor Study.
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Hourly Wages Are Growing Again
0
1
2
3
4
5
6
2007
03
2007
09
2008
03
2008
09
2009
03
2009
09
2010
03
2010
09
2011
03
2011
09
2012
03
2012
09
2013
03
2013
09
2014
03
2014
09
Percent Change (Same Month Year Ago) in Average Hourly Earnings of Construction Employees
Source: Bureau of Labor Statistics, Current Employment Statistics.
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Apprenticeship Programs Have Fallen Steadily
0
5
10
15
20
25
30
35
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Fiscal Year
28
Number of Nationally Registered Active Apprenticeship Programs (Thousands)
Source: US Department of Labor, Employment and Training Administration.
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Construction Occupations with Residential Application Consistently Rank as Largest Apprenticeship Programs
0
5
10
15
20
25
30
35
40
Electrician Carpenter Plumber Roofer Painter
FY 2011FY 2012FY 2013FY 2014
29
Number of Active Apprentices in Top Federally Administered Programs (Thousands)
Note: Occupations were ranked in the top 10 largest programs.Source: US Department of Labor, Employment and Training Administration.
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Research Summary
• Total number of residential remodelers likely contracted significantly during the downturn, but firms are rebounding now, especially larger-scale.
• Top firms are growing about three times faster than total market spending for pro projects. Specialty contractors comprise over half of largest remodeling firms.
• The construction industry lost 1.5 million workers since the peak. Industry must look to offering better pay/benefits and training/apprenticeships to combat shortages.
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