Outlook for Minnesota construction industry positive, but labor and tariffs pose challenges

NINA MOINI: Some 140,000 Minnesotans work in construction, and job growth in the construction industry has continued to outpace the overall economy in recent years. That's according to the State Department of Employment and Economic Development, or DEED.

And while a survey of more than 170 construction businesses shows a slightly less optimistic outlook from within the industry for the next year than previous years. The survey was carried out by the Associated General Contractors of Minnesota, a trade group for contractors across the state. And Tim Worke heads the organization, he's here to tell us more about these results. Thanks for being with us, Tim.

TIM WORKE: Well, hi, Nina. I appreciate the opportunity to be here and to share some of these findings with you today.

NINA MOINI: Yeah, it's very important. And I think what's nice about a survey, too, is it really kind of gets in there and you can hear from the people who are on the ground besides just numbers that we might read or hear about. You're actually able to connect with people through a survey like this. So I wonder what your big-picture takeaway was from the survey. How are people feeling?

TIM WORKE: Yeah, I think probably a good way to answer that and frame this up for folks is to understand that we're a commercial construction organization, and that means we don't have any single-family home-builders, that's a different group. So we're the folks who do all the construction work, heavy civil highway work, and other large-scale construction.

But we've been doing this survey with our membership for about 15 years now, and we collect that data and have it all available, and we get a good response. And like you said, we had over 170 responses from our members this year, and overall, they have shown a generally positive outlook.

Some of the questions relate to asking, what is your outlook? What is your feeling about next year as we transition into the new year. And then some of it is a look back at actual hard data on what they're experiencing and what are some of the headwinds and what are some of the tailwinds relative to their businesses.

But generally, next year, there is a positive outlook in the commercial construction sector, but it's less robust than it had been last year.

NINA MOINI: Yeah. So I hear you saying it's not that anything is terrible, it's just there are certain challenges that persist and are of the time that we're in right now. What are some of those challenges, do you think, that could contribute to this slightly less positive outlook?

TIM WORKE: Well, obviously, Nina, workforce and a declining-- or a challenging workforce marketplace is probably, in the data, showed is the number one headwind. And the cost of that labor continues to creep up, and that cost is a challenge.

And I think overall, one of the interesting quotes, or one of the interesting outlooks of the survey, was that contractors indicated they would certainly be able to do more if they had access to more skilled labor in the marketplace.

Second to that, though, however, are things like inflation and tariffs that are in the national news more prominently, but especially because those input factors affect the way contractors price their work because they're reflective in the input costs of materials, and the availability of materials.

But this is the first time we've seen tariffs come into that conversation and reflected in the data, and we had not had tariffs be a factor in prior iterations of the survey.

NINA MOINI: Mm-hmm. Tariffs aren't something that necessarily obviously you can control, but when it comes to this persistent worker shortage, what do you see as some solutions to that?

TIM WORKE: Well it's been a persistent challenge in the industry, and there are so many factors that affect skilled trade work, and the number one thing I think is the seasonality of the work.

I'm fairly confident that most of your listeners don't recognize that construction work is very seasonal, that folks in particular sectors of construction work eight months of the year and have to spread their income over 12 months because they're laid off, because simply the weather conditions don't support employment in construction at the levels it does when the weather is more conducive to doing construction work.

There's travel involved. You're away from home for very long periods of time, and that can be a challenge. There's the long hours, the unpredictableness of the nature of the work. So it's not like a manufacturing or a retail component of the general economy where it's very predictable. It's five or six days a week for 9:00 to 5:00 type of certainty to it.

And so it really takes a level of commitment, a level of desire, passion for the type of work. And then the market can really affect that workforce availability. When you have a boom market and there's strong demand, it's very difficult to find people because they saturate and come into that and are sucked up by that boom portion of the market, and then there are less available folks to do the work in the other sectors of the market.

NINA MOINI: So some seasonal work there. I wish we had more time, Tim. We only have about a minute left or so, but before we go, give us just an your overall sense for the construction industry and where it's at right now in the state of Minnesota because I know that it has done better than other states in the past. Like, how would you rate what's going on right now within the industry?

TIM WORKE: Yeah, I think it's steady and it's strong. And I would add that there's a tinge of apprehension and maybe excitement because of the advent of what technology tools may hold, and that's reflected in our survey as well.

NINA MOINI: Mm-hmm.

TIM WORKE: That the adoption of technology tools is going to start to take hold in construction where it's been less prominent related to other industries. So I think we're going to see some rapid change descend on the construction industry relative to that application of technology.

But overall, we're expecting a positive outlook for next year. We're expecting strong, strong opportunity, and our members, in the survey, have certainly shown that in the data.

NINA MOINI: All right. Thanks so much for your time, Tim, really appreciate learning about this.

TIM WORKE: Yeah. Thank you, Nina. Appreciate talking to you.

NINA MOINI: That's Tim Worke with the Associated General Contractors of Minnesota.