Digging into Construction Data

By Simonson, Kenneth D. | Business Economics, April 2005 | Go to article overview

Digging into Construction Data


Simonson, Kenneth D., Business Economics


Construction is a large, diverse, and--lately--fast-growing sector of the U.S. economy, comprising several distinct categories of activity. Construction accounts for roughly five percent of non-farm payroll employment and 12 percent of self-employment. The value of construction put in place totals eight percent of GDP: construction supplies and equipment are important components of manufacturing output. The current outlook for the industry is for a pause in the fast-growing residential market, but we can expect an acceleration in private and public nonresidential construction. Data on different aspects of construction are available from a variety of federal and private sources. There are limitations and pitfalls that data users should bear in mind.

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The construction industry is a major contributor to the economy as data from a variety of sources attest. Here is a concise drive down "the construction data highway," with a glance in the rearview mirror, a look at the road ahead, and a few warning signs about potholes in some of the indicators.

Statistics and Sources

Construction employment in the United States in 2004 averaged 7.0 million, or five percent of non-farm payroll employment, according to the monthly employment situation report (www.bls.gov/ces) from the U.S. Bureau of Labor Statistics (BLS). Moreover, two million of the nation's 18 million sole proprietors and other non-employer businesses were in construction, according to the U.S. Census Bureau's non-employer statistics (www.census.gov/epcd/nonemployer). Note that the employed and non-employed workers are not additive since many employees moonlight or turn to self-employment between payroll jobs.

The value of construction put in place (www.census.gov/construction-spending), a measure of the amount spent on design, engineering, and construction, was $1 trillion in 2004, according to the Bureau of Census. This amount is equivalent to roughly eight percent of GDP. Approximately half of that total represented value added by construction firms directly, according to the U.S. Bureau of Economic Analysis (BEA)'s estimate of GDP by industry (www.bea.gov/bea/pn/GDPbyInd_VA_NAICS.xls). The other half was for purchases of goods and services.

Bureau of Census figures (www.census.gov/indicator/www/m3) show that shipments of construction materials and supplies in 2004 totaled $471 billion or nearly 11 percent of total manufacturing shipments. Shipments of construction machinery totaled $29 billion--ten percent of total machinery shipments. Shipments do not equate to construction industry purchases, since shipments include exports and sales to non-construction customers. Conversely, construction projects use materials and equipment that are imported as well as items that are not construction-specific, such as diesel fuel and pickup trucks.

Costs for construction materials and components jumped ten percent between December 2003 and December 2004, a bit more than the 9.1 percent increase in the U.S. Bureau of Labor Statistics (BLS)'s producer price index (PPI) for all intermediate goods and far ahead of the 4.1 percent gain in the finished-goods PPI (www.bls.gov/ppi). The PPI for construction machinery and equipment climbed six percent during this period.

Most construction firms are tiny. The Census Bureau's County Business Patterns identified 710,000 construction establishments in 2002, with a total of 6.3 million employees, or nine per establishment (www.census.gov/epcd/cbp/view/cbpview.html). Of these, 647,000 or 91 percent had fewer than 20 employees, and only 467 or 0.07 percent had 500 or more. Nearly all the construction firms have only one 'establishment,' or fixed location, although they may operate at numerous job sites in the course of a year.

There is a large seasonal element to some types of construction work, such as highway construction in Northern states. For example, seasonally adjusted hiring in construction was nearly level in November and December 2004--388,000 and 385,000 respectively--while unadjusted hiring plunged from 299,000 to 236,000, as reported by the BLS in its monthly Job Openings and Labor Turnover release (www. …

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