As the Michigan construction sector experiences a surge in job creation, its workforce has failed to grow at a rate that matches the demand. In Michigan, as well as other parts of the country, labor has become a scarce commodity. Since the pandemic, the region’s labor force only reached a high of 5.06 million participants in 2024, and that’s just a 2.5 percent improvement from the number before the pandemic.

The good news is that the regional construction industry has emerged from the pandemic as a formidable growth engine. With a strong year-over-year job growth rate of 6.6 percent — dwarfing the overall economic job growth rate of 0.8 percent — the construction sector stands as a pillar of Michigan’s economic strength. Since the pandemic, jobs in the construction industry have grown by 12.3 percent, another statistic that compares favorably to the total employment rate’s anemic change of 0.6 percent.

The heightened demand for construction services has led to intense competition for workers, driving wages upward and intensifying hiring competition while straining project budgets and completion timelines. While the industry’s growth has been exceptional, the labor crunch casts a dark shadow on an otherwise stellar performance.

A close look at the national construction industry paints a bleak picture. Although buoyed by a sturdy quarter overall, construction at the national level experienced a slight dip in spending, with a mere 1 percent increase over the full year. After factoring in inflation, this suggests a decline in real dollar investment. It is a potent example of the selective pressures bearing down on various construction market segments and shades encouraging data on the local region’s growth.

In Marcum’s most recent construction survey analyzing Q4 of 2023, the Commercial Construction Index, Marcum Chief Construction Economist Anirban Basu suggested that price escalations have leveled off to offer some relief, particularly in the later parts of the year. Yet, despite these tailwinds, including global supply chain improvements and a reduction in global demand, commodity prices persist at levels approximately 38 percent higher than those seen at the pandemic's outset.

The urgent need to attract and retain skilled labor has necessitated inventive hiring strategies. Joseph Natarelli, Marcum's National Construction Leader, underscored the importance of closely watching market conditions and actively attempting to overcome labor woes. For contractors, that might mean doubling down on workforce development, apprenticeships, and community engagement efforts to entice the next generation into the trades while further developing the existing workforce.

While all eyes remain fixed on the Federal Reserve's monetary policies, most regions will hope for falling rates to kickstart activity. If that happens, it's possible that competition for labor could become an even more severe issue facing construction in Michigan. Marcum's survey of the national industry reveals that industry leaders feel the need to stay alert and flexible in response to economic changes to sustain momentum and navigate through any forthcoming uncertainty. For local leaders, the ongoing labor shortfall has been a consistent pain point since the early days of the pandemic. Unfortunately for the region, it’s a major issue that doesn’t look to be abating anytime soon.

Joseph Natarelli is the Office Managing Partner for Marcum LLP’s New Haven, Connecticut, office and a member of the firm’s Executive Committee. A specialist in accounting for construction contractors, Natarelli also serves as National Leader of Marcum’s Construction Services practice, overseeing audit, consulting, and taxation services to construction clients ranging from start-ups to multi-billion-dollar international enterprises.

He has extensive experience advising on mergers, acquisitions, and divestitures. He has served as a Technical Reviewer for the American Institute of Certified Public Accountants’ (AICPA) construction audit and taxation guides for more than two decades and chaired the AICPA National Construction Program Conference Committee from 2012 to 2014.