US Construction Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 801,704 construction sector establishments are involved in the clearing and preparation of land; building of structures and infrastructure; installation of mechanical systems, nonstructural components and finishings; and the remodeling and expansion of existing structures. The sector is segmented into construction of buildings (residential and nonresidential), heavy and civil engineering, and specialty trades.
Dependence on the Economy and Market
Demand for construction is highly dependent on economic health and can vary considerably across markets.
Seasonal and Weather-Related Factors
Seasonality and weather conditions affect project timelines and contractors’ ability to perform work.
Industry size & Structure
The construction sector is comprised of 801,704 establishments that employ 8 million workers and generate $3 trillion in annual revenue, according to government sources.
- The construction sector represents 4% of the nation's Gross Domestic Product (GDP) and employs 5% of the country's workers.
- The specialty trade contracting segment is highly fragmented: the 50 largest specialty trade firms represent 7% of segment revenue. The 50 largest building construction firms represent 20% of segment revenue; the 50 largest heavy and civil works firms represent 26% of segment revenue.
- The construction sector has a high volume of independent contractors with no employees. The number of nonemployer establishments is about 837,826 in building construction, 38,909 in heavy and civil works, and 1.8 million in specialty contracting. The owner of nonemployer establishments typically performs the work or subcontracts labor for large or complex jobs.
- The construction sector shed 78,000 establishments in 2021, which equals about 8.5% of existing establishments, according to the Bureau of Labor Statistics. However, the industry added 98,000 new establishments, which is equivalent to 10.7% of existing establishments. As a result, the construction sector has an average growth rate of 2.2%.
- The construction sector is forecast to grow its employment base by 2.8% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Construction Sector Industry Growth
Recent Developments
Jul 2, 2024 - Home Builder Confidence Drops
- Home builder confidence in the single-family market dropped in June to the lowest level since December 2023 amid high mortgage rates and elevated builder financing costs, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), fell two points to 43 in June 2024. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The HMI survey also showed that 29% of builders have reduced home prices to lure potential buyers off the sidelines, although the average price reduction of 6% remained unchanged for the twelfth consecutive month.
- In May, US producer prices for materials used in residential construction fell 0.09%, according to National Association of Home Builders analysis of Bureau of Labor Statistics data. While the slight dip in pricing wasn’t much of a change from the previous month, it was the first drop in residential building materials pricing since October 2023. However, residential construction input prices were up 2.9% compared to May 2023. Softwood lumber prices fell 5% in May from April and declined 8.1% year-over-year. Prices for copper increased 8.5% in May over the previous month and were up 17.1% over May 2023. Gypsum building materials prices in May remained at April levels and were up 2.1% compared to a year earlier. May prices for ready-mix concrete fell 0.1% from April but were 5.6% higher year-over-year.
- Some multifamily developers are pulling back on project plans amid high interest rates, tighter lending standards, and increased construction costs, according to The Wall Street Journal. In April, multifamily starts dropped to 322,000, marking the weakest April for starts since 2020, according to Yardi Matrix. In 2023, about half a million new apartment units came online, and some industry observers expect a similar influx of apartment supplies in 2024. The surge in new apartment supply may mean having to reduce rent to fill them, which gives developers of new projects pause. Some regional banks have less money to lend as their existing portfolios of commercial real estate loans are marked down.
- Demand for building design services slipped in May from the prior month, as architectural billings remain soft, according to a June report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) fell to 42.4 in May from April’s reading of 48.3. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries fell to 52.1 in May compared to 54.8 in April, and the index for the value of new design contracts decreased from 49.2 to 45.6. The AIA’s Chief Economist, Kermit Baker said, "The decline in the May ABI score continues a year and a half of weakness in design billings at U.S. architecture firms. However, firms only reported modest declines over the first half of this period. Over the past nine months, volatility has increased, and scores have softened more significantly, with the May score the weakest reported since the end of the pandemic recession."
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