The 2005 Craft Labor Study

1
The 2005 Craft Labor Study Randy Giggard FMI
Corporation
2
Background

• Initial Craft Labor Study Conducted Spring/Summer
  2003
• Current Projections for the Period 2003-2008 (5
  years) Total Indy Construction gain
  2.47B 34.6
• Non-Residential Bldgs. gain 1.14B 33.2
• Craft Labor Shortage Projected to Reach 1,450 by
  2008
• Summer/Fall 2006 will be a Critical Period
• The Model suggests Spot Shortages going into a
  Major Ramp-up in 2007 and 2008
• Study Validity?

3
2005 Update Objectives

• Update Demand Forecast for Construction PiP
• Revise the Craft Labor Model Forecasts to a
  Current Dollar Basis
• Update Skilled Craft Labor Supply Estimates
• Assess the Magnitude and Timing of Projected Gaps
  between Craft Labor Supply and Demand

4
Update Study Design

• Extensive Review of Demand Side Variables
• Primary Secondary Research of Labor Supply
• 3-Year History/5-Year Forecast (2002-2009)
• 5 Quarterly Breakouts 4Q05 to 4Q06
• 9 County Indianapolis Market Area
• Limited Assessment of 5 Nearby Cities
• 14 Specific Skilled Crafts No Changes

5
Methodology
Secondary Research
Building Characteristics
Supply/Demand Model
Craft Labor Demand Factors
Testing Validations
Preliminary Econometric Forecast
Finalize Demand Forecast
Interpretations Recommendations
Primary Research - Ltd. Interviews - Surveys
Finalize Supply Side Analysis
Project Delivery
6
Methodology -- Sources

• U.S. Department of Commerce
• U.S. Dept. of Transportation
• U.S. Army Corps of Engineers
• Bureau of Census
• Bureau of Economic Analysis
• IN Dept. of Transportation
• Project Announcements (1000)

• Business Journals
• City Web Sites
• Owner Web Sites
• Press Releases
• Articles
• FMI Proprietary Databases
• FMI Forecasts and Models

7
Current U.S. Economic Climate

• 2001 2002 2003 2004 2005 2006
• Real GDP 0.8 1.6 2.7 4.2 3.5 3.3
• CPI 2.8 1.6 2.3 2.7 3.2 2.8
• Unemployment 4.8 5.8 6.0 5.5 5.0 5.0
• 3 mo. Treasury 1.7 1.2 0.9 2.2 3.9 4.3
• 10 yr. Treasury 4.1 3.8 4.4 4.2 4.5 5.0
• Housing Starts 1.60 1.71 1.85 1.95 2.02 1.88
• Oil (/Barrel) 26.7 28.0 28.3 37.5 62.7 57.2

8
Findings Total Construction Value

• Manufacturing Healthy Rebound on Basis
• Retail Erratic Consumer Spending Confidence
• Hotel Motel Finally Beginning to Invest Again
• Offices Vacancy Rates Declining Slowly
• Education Maintaining High Levels
• Highways Passage of SAFETEA Funding
• Airports Plight of the Airlines
• Total U.S. Non-Residential Growth 6 for 2005

9
Gulf Coast Reconstruction

• Most Costly Disaster in U.S. History Estimates
  from 100B to 200B
• Major Construction to Begin in 2006 5 Years
• Up to 300,000 Homes Permanently Lost
• Estimated 3.5B Needed for Infrastructure
• Estimated 500M Needed for Environmental
• Expected to Cause National Labor Shortages in
  Engineering Skills and Craft Labor

10
Central Indiana Construction

• Again Building Momentum
• Midfield Terminal, Stadium, Convention Center
• Public Program (Education, Highway, Sewer)
• Healthcare Construction
• Manufacturing/Industrial Expansions
• Review of Current Project Record Trackings 05
  vs. 04
• Number of Projects up 11 (995 v. 897)
• Value of Projects Falls 12 (6.4B v. 5.7B)

11
Total Central Indiana Construction Demand
12
Central Indiana Non-Residential Construction
Demand
13
Overall Progress is Being Made in Recruiting
Training

14
Craft Labor Example Sheetmetal Workers
15
Craft Labor Example Operating Engineers
16
Total Net Craft Supply Forecast
17
Forecast Labor Shortage by Craft
18
Seasonality in Indiana
19
Summary Findings

• Non-Residential Construction is Gaining Momentum.
  33 2008 vs. 2003
• For Years 2003-2005, Added Net 730 Craft Workers
• For Years 2005-2007, We Need an Added Net of 2400
  to Maintain a Minimal 6 Cushion
• Projected Growth in Central Indiana Demand
  Coincides with Greater Pressure from the Gulf
  Coast and Energy-Related Projects

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Summary Findings (Continued)

• The Cynic within us will Rightly Recognize that
  Forecasts are Never Right
• Discounted Values May be Appropriate, but
  Consider
• Seasonality yields an 8-10 demand spike
• Specific crafts skills are more susceptible
• Fewer travelers will be available Risk that
  current local workers will become travelers
• The airport, stadium, convention center projects
  account for just 4.26 of total construction
  through 2009. Big projects are prone to delays,
  but it would be of little help.

21
Randy Giggard Senior Research Director FMI
Corporation [phone] rgiggard_at_fminet.com Th
ank you!
22
ICR Study Response3rd Annual Review of Workforce
Development in Central Indiana

• Steve Powell, Chairman
• ICR Workforce Development Committee
• December 14, 2005

23
ICR Workforce Development Committee

• Bonnie Coghlan
• Indiana Department of Administration, Department
  of Public Works
• Bill Freeman
• Charles C. Brandt
• David Ford
• REI Construction Services
• John Gaylor
• Gaylor Group
• J.R. Gaylor,
• ABC of Indiana
• Phil Kenny,
• F. A. Wilhelm
• Paul Lee
• Eli Lilly and Company
• Donnie Reed
• Clarian Health Services

24
ICR General Objectives

• Assure that Central Indiana has the strategic
  data and resources it needs to effectively plan
  for its construction work force.

25
ICR General Objectives

• Assure that Central Indiana has the strategic
  data and resources it needs to effectively plan
  for its construction work force.
• Assure that the economic growth of Indiana is not
  impeded by a poorly prepared construction
  industry.

26
ICR General Objectives

• Assure that Central Indiana has the strategic
  data and resources it needs to effectively plan
  for its construction work force.
• Assure that the economic growth of Indiana is not
  impeded by a poorly prepared construction
  industry
• Assist industry and government agencies in the
  development of a trained and qualified workforce

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State/Local Economic ImpactNon Residential
28
Typical Media Attention
Source Nov. 2, 2005 Indpls. Star
29
Supply Comments

• Study results are annual average
• Think PEAK

30
ICR Continuing Involvement

• Assist members in
• Attracting and training workforce
• Finding ways to react quickly

31
ICR Continuing Involvement

• Assisting members in
• Attracting and training workforce
• Finding ways to react quickly
• Provide reliable data to industry through
  periodic studies

32
ICR Continuing Involvement

• Assisting members in
• Attracting and training workforce
• Finding ways to react quickly
• Provide reliable data to industry through
  periodic studies
• Outreach Diversity Programs

33
Comments and Suggestions

• Gary Price, Executive Director, ICR
• gprice_at_indianaconstruction.org
• Steve Powell, Chairman, ICR Workforce
  Development Committee
• spowell_at_aerconind.com
• Steve Young, Chairman, ICR Board of Directors
• youngs_at_mail.ips.k12.in.us