Construction Quick Facts

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Quick Facts about the US National Construction Industry

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.

• Construction is a significant source of jobs. The industry provides jobs for 7.6 million employees—more than 5% of the total nonfarm workforce. In contrast to the steep drop in homebuilding, nonresidential construction employment grew at least 0.9% from November 2006 to November 2007. This estimate is probably understated, since many “residential” construction employees are now doing nonresidential work, even though their employers are still counted as residential contractors.

• Construction jobs are good-paying jobs. In November 2007, seasonally adjusted hourly earnings in construction averaged $21.27 per hour, 21% higher than the average for all private industry nonsupervisory workers.

• Construction makes a disproportionately large contribution to GDP. For the past eight quarters, investment in private nonresidential structures has grown faster than gross domestic product (GDP). Construction spending totaled $1.16 trillion in October 2007; nonresidential was $647 billion (56%).

• 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.

• Materials costs are a major problem. From December 2003 to October 2007, the producer price index for inputs to construction jumped 28%, twice the 13% rise in the consumer price index.

• The typical construction firm size is very small. In 2005, there were 788,000 construction establishments with 6.8 million paid employees. Thus, average employment was less than nine per establishment. (An establishment is a permanent business location. Most construction firms have only one establishment.) More than two million additional construction firms had no paid employees—mainly self-employed individuals but also partnerships and holding companies

• Small business is big in construction. In 2005, 91% of construction establishments had fewer than 20 employees. Only 1% had 100 or more.

• Construction is a low-margin industry. Internal Revenue Service figures for 2004 show that the 722,000 corporations in construction had net income (less deficit) of $47 billion, or 3.7% of total receipts of $1.3 trillion. That was considerably below the all-industry average margin of 4.9%.

• 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 99,000 of 630,000 construction firms with employees in 2004 (16%) opened since 2003, while 77,000 firms closed.

• The 2007 Construction Industry Annual Financial Survey, conducted by the Construction Financial Management Assn. (www.cfma.org), included responses from 756 companies. The net margin before income taxes in the latest fiscal year averaged 2.7%. The median return on assets was 8.8%.

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