The construction industry has played a powerful role in sustaining economic growth, in addition to producing structures that add to productivity and quality of life.
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Construction is a significant source of jobs. The industry provides jobs for 7.7 million employees—more than 5% of the total nonfarm workforce. Even as homebuilding has declined recently, nonresidential construction has added 185,000 jobs in the past year—nearly 9% of all net new jobs.
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Construction jobs are good-paying jobs. In January 2007, seasonally adjusted hourly earnings in construction averaged $20.51, 20% higher than the average for all private industry nonsupervisory workers, according to BLS.
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Construction makes a disproportionately large contribution to GDP. The value of construction put in place in 2006 totaled $1.2 trillion, 9% of gross domestic product (GDP). Residential spending totaled $639 billion; nonresidential, $559 billion.
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Construction is a substantial purchaser of U.S. manufactured products. In 2006, shipments of construction materials and supplies topped $500 billion—nearly 11% of total U.S. manufacturers’ shipments. Shipments of construction machinery totaled $36 billion—11% of all U.S. machinery.
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Materials costs are a major problem. In the past three years, the producer price index for construction materials and components jumped 22%, more than double the 9% rise in the consumer price index.
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The typical construction firm size is very small. In 2005, there were 831,000 construction establishments with 6.8 million paid employees, plus more than two million firms without paid employees—mainly self-employed individuals but also partnerships and holding companies. Thus, average employment was only eight per establishment. (An establishment is a permanent business location. Most construction firms have only one establishment.)
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Small business is big in construction. In 2005, 91% of construction establishments had fewer than 20 employees. Only 1% had 100 or more.
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Construction is a low-margin industry. Internal Revenue Service data for 2003 shows that the 676,000 corporations in construction had net income (less deficit) of $32 billion, or 2.8% of total receipts of $1.1 trillion. That was barely half of the all-industry average margin of 5.5%.
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Construction is a high-turnover industry in terms of entering and exiting firms. Census data prepared for the Office of Advocacy of the U.S. Small Business Administration shows that 87,000 of 600,000 construction firms with employees in 2003 (14%) had no workers in 2002, while 78,000 firms closed.
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The 2006 Construction Industry Annual Financial Survey, conducted by the Construction Financial Management Assn. (www.cfma.org), included responses from 495 companies. Net earnings before income taxes in the most recent fiscal year averaged 2.4%. The median return on assets was 6.4%.
