A Closer Look: Construction Industries
Labor Productivity for Construction
On September 17, 2018 the Bureau of Labor Statistics (BLS) updated measures of productivity for four construction industries through 2017. These industries have only recently been published due to difficulties in measuring output and hours worked. More information can be found in an article written by BLS economists in the Monthly Labor Review.
The construction sector makes up a large portion of the U.S. economy. In 2017, 6.1 percent of all industry employment and 4.3 percent of GDP was attributable to this sector. Recently, BLS began publishing labor productivity measures for four construction industries, which comprise about 10.5 percent of the entire sector's employment:
- Single-family residential construction – NAICS 236115x (1987-2017)
- Multiple-family residential construction – NAICS 236116x (1987-2017)
- Industrial building construction – NAICS 236210 (2006-2017)
- Highway, street, and bridge construction – NAICS 237310 (2002-2017)
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The chart above highlights the four construction industries published by BLS and their respective changes in labor productivity, output and hours worked during the current business cycle. Industrial building construction (NAICS 236210) experienced the largest growth in productivity as output increased much faster than hours worked. The four industries are described in further detail below.
Single-Family Residential Construction (NAICS 236115x)
New housing for-sale builders (NAICS 236117) includes both single- and multiple-family homes. On the basis of bridge tables published in the 2002 Census of Construction, BLS combines the single-family portion of NAICS 236117 (98 percent) with the entire new single-family housing construction industry (NAICS 236115) to form a combination industry: single-family residential construction (NAICS 236115x).
The graph above illustrates the trends in output, hours worked, and labor productivity for single-family residential construction (NAICS 236115x). Labor productivity rose during the 2000-2005 period, primarily driven by a large increase in output. Starting in 2005, output fell through 2009 at a considerably faster rate than hours worked, leading to a sharp decrease in labor productivity in the period. Labor productivity has grown since 2009, but in 2017 it remained far below its 2005 peak.
Multiple-Family Residential Construction (NAICS 236116x)
Similar to single-family residential construction, BLS combines all of new multiple-family housing construction (NAICS 236116) with the multiple-family portion (2 percent) of new housing for-sale builders (NAICS 236117) to form new multiple-family residential construction (NAICS 236116x).
The graph above shows that multiple-family housing construction (NAICS 236116x) experienced large gains in labor productivity from 1993 to 2007, as output increased far faster than hours worked. The industry then experienced a sharp decrease in output and a slight drop in hours worked, leading to decreasing labor productivity until 2010. After 2010, output rebounded substantially until 2017, when it declined slightly. Labor productivity growth over the 2010-2017 period is still quite significant for this industry.
Industrial Building Construction (NAICS 236210)
The chart below shows that the output and labor productivity trends for industrial building construction (NAICS 236210) followed similar paths, as growth in hours worked remained fairly flat from 2006 to 2017. Similar to the other industries, output and labor productivity fell after 2009, but did rise significantly from 2011 to 2015 before declining again in 2016 and 2017.
Highway, Street, and Bridge Construction (NAICS 237310)
The graph below shows that the highway, street, and bridge construction industry (NAICS 237310) did not experience a fall in output during the Great Recession (which occurred December 2007 to June 2009). Rather, the industry saw a large rise in output and labor productivity. However, since 2009, labor productivity has fallen as hours worked have increased but output has declined.
Frequently Asked Questions
Q: What are the challenges in measuring productivity growth in construction?
A: Productivity is difficult to measure for construction industries because of challenges in measuring both output and hours worked. The main challenge to measuring output is that construction projects differ widely in characteristics and features. For example, a 2,000 square foot single-family residence could differ based on quality of materials used, region of country, and the nature of the underlying terrain. Consequently, it is difficult to develop reliable output price deflators to convert observed revenues into constant dollar measures of output growth.
For hours worked, there are two potential measurement limitations. First, the omission of some undocumented immigrants could understate hours worked. Secondly, subcontractors are not classified in the industry in which they ultimately perform work.
Q: Do these measures of hours worked include labor obtained from subcontractors?
A: These measures do not include work done by subcontractors. Many builders use specialized subcontractor labor, such as plumbers or carpenters, to supplement or replace their own labor force. The services of subcontractors would normally be included as purchases of materials inputs, much as any other firm purchases necessary inputs from its suppliers. Since the present analysis considers only labor productivity growth, it does not account for materials inputs. The Monthly Labor Review article examines productivity trends if subcontractors are included in official measures. The findings show that estimates of labor productivity growth are typically lower, often by substantial margins, when labor inputs includes hours worked obtained from subcontractors.
Q: Do these measures of hours worked include labor obtained from undocumented laborers?
A: It is likely that at least some undocumented laborers are included in official measures of employment (see link). However, if these laborers work off the books then they may not be included in measures of labor hours. For purposes of productivity growth, the important factor is not the level of unmeasured undocumented laborers, but rather how that level has changed over time. Previous research has found that not capturing all undocumented laborers has a minimal impact on productivity measurements.
Q: Do you have productivity measures for the construction sector as a whole?
A: Yes. The BLS Productivity Program publishes labor and multifactor productivity measures for all sectors, including construction. These measures for construction are at the 2-digit NAICS level, while the four newly developed construction industries highlighted here are at the 6-digit NAICS level. Output and input measures for 2-digit and 3-digit nonmanufacturing sectors are often difficult to measure and can produce productivity measures of inconsistent quality. Data users should be cautious when interpreting the data. See data tables (XLSX).
Q: Do you have productivity measures for other specific construction industries?
A: Not yet. BLS plans to explore the creation of productivity measures for additional construction industries by utilizing establishment level microdata from the U.S. Census Bureau. The microdata may make it possible to create measures for at least seven additional industries including warehouses, schools, offices, and several contractor industries. The four industries examined here are those for which data are currently available. The availability of deflators also determines the period of time over which productivity can be studied for different industries.
Industries at a Glance: Construction NAICS 23
Overview of BLS Productivity Statistics
Last Modified Date: November 2, 2018