Quick Facts About the Construction Industry

By Jerry Davis, CPA - The Association of General Contractors has updated their Quick Facts about the Construction Industry. Following is the information provided in the fact sheet:

· Construction is a significant source of jobs. The industry provides jobs for 7.3 million employees—more than 5% of the total nonfarm workforce. Nonresidential construction accounted for at least 4.3 million workers in May 2008. (As many as 370,000 additional specialty trade contractors may have been incorrectly counted as residential workers but are now employed in nonresidential work.)

· Construction jobs are good-paying jobs. In May 2008, seasonally adjusted hourly earnings in construction averaged $21.68 per hour, 21% higher than the average for all private industry nonsupervisory workers, and an increase of 3.7% since May 2007.

· Construction makes a disproportionately large contribution to GDP. For 10 straight quarters through early 2008, investment in private nonresidential structures grew faster than gross domestic product (GDP). Construction spending totaled $1.16 trillion (8.4% of GDP) in 2007; nonresidential spending amounted to $629 billion (54%) of that total and was up 15% from 2006.

· Construction is a major purchaser of U.S. manufactured products. Shipments of construction materials and supplies in 2007 totaled $518 billion—more than 10% of all U.S. manufacturers’ shipments. Construction machinery shipments totaled $28 billion—8% of all machinery shipments.

· Materials costs are a major problem. From December 2003 to May 2008, the producer price index for inputs to construction jumped 2939%, more than double the 14rise in the consumer price index.

· The typical construction firm size is very small. In 2005, there were 778,000 construction firms with 6.8 million paid employees. Thus, average employment was less than nine per firm. 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, 92% of construction firms had fewer than 20 employees. Only 1% had 100 or more.

· Construction is a low-margin industry. The 2007 Construction Industry Annual Financial Survey, conducted by the Construction Financial Management Assn., 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%. 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.

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