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Productivity
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Construction Labor Productivity
On September 22, 2022 the Bureau of Labor Statistics (BLS) updated measures of productivity for four construction industries through 2021. More information on these measures can be found in an article written by BLS economists in the Monthly Labor Review.
The construction sector, as defined by the North American Industry Classification System (NAICS), makes up a large portion of the U.S. economy. In 2021, 5.1 percent of all U.S. nonfarm payroll employment[1] and 4.2 percent of GDP[2] were attributable to this sector. BLS publishes labor productivity measures for four construction industries, which comprise about 12.0 percent of the entire sector's employment:
- Single-family residential construction – NAICS 236115x (1987-2021)
- Multiple-family residential construction – NAICS 236116x (1987-2021)
- Industrial building construction – NAICS 236210 (2006-21)
- Highway, street, and bridge construction – NAICS 237310 (2002-21)
Downloadable data tables
(Excel 2013 or later)
Labor productivity and costs measures for selected construction industries
Charts 1 and 2 highlight the four construction industries published by BLS and their respective changes in labor productivity, output, and hours worked over the periods 2007-19 and 2019-21. The four industries are described in further detail in the following sections below.
In both housing construction industries, productivity increased from 2019-21 after declining over the 2007-19 period. Productivity grew fastest in single-family housing (NAICS 236115x) among the four industries from 2019-21.
In industrial building construction productivity rose over both periods with a greater increase during the 2019-21 interval. Highway, street, and bridge construction was the only industry with decreasing productivity from 2019-21 and saw a larger decline over this period compared to 2007-19.
Single-Family Residential Construction (NAICS 236115x)
New housing for-sale builders (NAICS 236117) includes both single- and multiple-family homes. 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 chart above illustrates the trends in output, hours worked, and labor productivity for single-family residential construction (NAICS 236115x). Productivity rose during the 2000-05 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 productivity in the period. These years correspond with the collapse of the housing market. Productivity grew from 2009 to 2013 but steadily weakened through 2019.
Preliminary data show that productivity rose in both 2020 and 2021. In 2020, output grew while hours worked declined. The productivity gain in 2021 came from a continued rise in output outpacing an increase in hours worked. (Source data are subject to revision.)
Multiple-Family Residential Construction (NAICS 236116x)
Like single-family residential construction, BLS combines all 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 chart above shows that multiple-family residential construction (NAICS 236116x) experienced large gains in labor productivity from 1993 to 2007, as output increased far faster than hours worked. The industry then saw a sharp decrease in output and a moderate drop in hours worked, leading to decreasing productivity until 2010. From 2010 to 2014, output rebounded substantially, leading to significant productivity growth. However, productivity plunged from 2015 to 2018 due to growth in hours worked outpacing growth in output.
The 2021 updated data suggest that productivity rose from 2018 through 2021 as output has increased faster than hours worked. The U.S. Bureau of Economic Analysis’ National Income and Product Accounts price deflator used in the output calculations for NAICS 236116x is not currently available for 2021. In the interim, the series was extended using the Census Bureau’s price index for multifamily housing units under construction, which tracks closely with the standard deflator.
Industrial Building Construction (NAICS 236210)
The chart below of data trends for the industrial building construction industry (NAICS 236210) shows that from 2006 to 2019, the productivity trend was mostly consistent with output. Both indexes rose until 2009, then fell sharply following the 2007-09 recession, recovered from 2011 to 2015, and then declined again through 2018. The change in hours worked was slow and uneven, but positive over the 2006-18 period. In 2019, a rise in output and a drop in hours worked led to the first gain in productivity since 2015.
The year 2020 saw drops in both output and hours worked. This led to an increase in productivity because the fall in hours worked was deeper. In 2021, however, preliminary data suggests that hours worked increased while output continued to fall, resulting in another drop in productivity.
Highway, Street, and Bridge Construction (NAICS 237310)
The chart below shows that, similar to the industrial buildings industry, labor productivity in the highway, street, and bridge construction industry (NAICS 237310) increased during the 2007-09 recession. Output rose as hours worked declined during this period. Then, until 2019, productivity fell most years as output slightly declined while hours worked saw net growth. Productivity increased in 2020 as output increased and hours worked continued to fall. In 2021, however, this uptick reversed itself as output fell faster than hours worked, resulting in productivity declining.
Questions and Answers
- What are the challenges in measuring productivity growth in construction?▸
- 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. Second, subcontractors are not classified in the industry in which they ultimately perform work.
- Do these measures of hours worked include labor obtained from subcontractors?▸
- 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.
- Do these measures of hours worked include labor obtained from undocumented laborers?▸
- It is likely that at least some undocumented laborers are included in official measures of employment. 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 the measurement of productivity growth.
- Do you have productivity measures for the construction sector as a whole?▸
- Yes. The BLS Productivity Program publishes labor and total factor 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 the major industries total factor productivity data table.
- Do you have productivity measures for other specific construction industries?▸
- 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.
Related resources
Industries at a Glance: Construction NAICS 23
Notes
[1] Source: BLS Current Employment Statistics Databases
[2] Source: BEA Gross Domestic Product By Industry. Using the interactive data tool, select Value Added by Industry, then Value added by Industry as a Percentage of Gross Domestic Product.
Last Modified Date: September 22, 2022