Construction
The construction industry includes a wide-variety of building activities from homes and apartments, office buildings and factories, to highways and public facilities. In contrast to manufacturing establishments, employment within the construction industry typically occurs at the construction site.
Trends within the construction industry exhibit responsiveness to overall economic growth, population growth, and major infrastructure projects funded by governments. Particular factors that have important impacts on residential construction markets are interest rates, housing prices, and demographic trends such as average number of persons per household and the average age at which people form households. In the short term, construction activity is sensitive to interest rates and the business cycle. In the long term, construction activity is primarily determined by population and economic growth. Population growth principally affects the demand for residential housing, whereas economic growth affects non-residential (commercial, industrial) construction.
Historically, construction activity in the state has been volatile. Besides its strong ties to the cyclical housing market, construction activity in Washington State has been particularly influenced by large public works projects. For instance, the state construction industry was buoyed by large public expenditures during the late 1970s when the Washington Public Power Supply System (WPPSS) had five nuclear power projects under construction. The nature of the WPPSS projects required a highly-skilled and thus highly paid construction work force and its unparalleled scale triggered one of the largest population in-migration periods in the state’s history. During the early 1980s, construction activity declined dramatically due to the WPPSS projects cancellation and the severe national recession.
Covered Employment in Washington Construction Industry,
1947-1998
Source: Washington Employment Security Department
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In spite of its boom-bust nature, the long-term average construction employment relative to total nonfarm employment has been quite stable. Since the last twenty-five years, construction employment has averaged 5.5 percent of total nonfarm employment, with significant fluctuations occurring around this level during boom and bust periods. In general, the ratio of construction employment to total nonfarm employment has been trending upward during the last twenty-five years. The lowest ratios (4.7 to 5.1 percent) occurred during the early 1970s and early 1980s coincident with national recessions. The highest ratio (6.6 percent) occurred in 1979 during an economic boom spawned in part by the WPPSS construction activity.
Annual Change in Construction and Nonfarm Employment in
Washington, 1971-1998
Source: Washington Employment Security Department
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Number of Establishments in Washington Construction, 1981-1998
Source: Washington Employment Security Department
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Construction Employment and the Value of Construction Permits in
Washington, 1980-1998
Sources: U.S. Bureau of Census, U.S. Bureau of Economic Analysis
For more detail of above graphic
Note: Total employment for 1998 is estimated.
At the conclusion of the 1980s, Washington experienced strong population growth, mainly due to in-migration and strong economic growth relative to the nation. Housing permits authorized in Washington topped 45,000 each year between 1988 and 1990; and non-residential construction activity increased. The Puget Sound region in particular was one of the nation’s ten most active housing markets. Consequently, growth rates for construction employment during this period averaged 5.1 percent. With the exception of 1998, this growth rate has not been sustained during the 1990s, having slowed down to an average annual rate of 0.6 percent.
Number of Housing Permits Authorized in Washington, 1980-1998
Source: U.S. Bureau of the Census, C-40 series.
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In 1998, the state construction industry employed 133,800 covered workers with an annual payroll of $4.5 billion. When self-employed and proprietors are included with covered workers, total 1998 state construction employment was 201,200 with total labor earnings (covered wages & salaries and proprietor income) of over $7.0 billion.
Covered Employment in Washington’s Construction Industry,
1981-1998
Source: Washington Employment Security Department
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Table 1
Occupational Profile of Construction Workers in Washington, 1998
and 2008
Source: Washington Employment Security Department
Estimated 1998 |
Projected 2008 |
|||
| Construction, SIC 15/16/17 |
Estimated Employment |
Percent of Total Employment |
Projected Employment |
Percent of Total Employment |
| Managerial & Administrative | 13,022 |
9.2% |
14,718 |
9.4% |
| Professional, Paraprofessional & Technical | 6,218 |
4.4% |
7,142 |
4.6% |
| Sales & Related Occupations | 1,701 |
1.2% |
1,883 |
1.2% |
| Clerical & Administrative Support | 12,761 |
9.0% |
12,487 |
8.0% |
| Service Occupations | 781 |
0.6% |
844 |
0.5% |
| Production, Operating & Maintenance | 78,261 |
55.3% |
88,283 |
56.3% |
| Operators, Helpers & Laborers | 24,076 |
17.0% |
26,283 |
16.8% |
| Undefined Occupations | 4,749 |
3.4% |
5,292 |
3.4% |
| TOTAL | 141,569 |
100.0% |
156,932 |
100.0% |
Average annual wages of covered construction workers was $33,653 in 1998, slightly below the statewide average of $33,922. In real terms (removing the effects of inflation), however, Washington construction workers have seen their wages decline by 0.9 percent annually since 1981. The decline in wages is due in great part to the substantial number of highly-paid construction workers engaged in building the WPPSS projects during the late 1970s. The earnings profiles of construction industries are widely different from the statewide earnings profile. Heavy construction has a high concentration of "good"- and "high"-wage jobs; nearly half of the workers earned more than $20 per hour. Over a third of the general contractors and special trade contractors earn $20 or more per hour.
Table 2
Real Average Wages for Washington Covered Construction Workers,
1981-1998 (1998 dollars)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis
| Construction Sector | 1981 |
1983 |
1985 |
1987 |
1989 |
1991 |
1993 |
1995 |
1997 |
1998 |
| General Contractors | ||||||||||
$35,883 |
$31,893 |
$27,909 |
$27,709 |
$27,844 |
$29,195 |
$29,041 |
$29,450 |
$31,157 |
$32,162 |
|
| Heavy Construction | ||||||||||
$47,455 |
$45,538 |
$37,584 |
$38,485 |
$37,342 |
$37,463 |
$38,384 |
$38,807 |
$41,513 |
$42,032 |
|
| Special Trades Contractors | ||||||||||
$37,922 |
$32,701 |
$28,399 |
$27,675 |
$28,147 |
$28,551 |
$28,582 |
$29,293 |
$31,443 |
$32,409 |
|
| Total Construction | ||||||||||
$39,689 |
$35,227 |
$29,920 |
$29,414 |
$29,421 |
$30,041 |
$30,128 |
$30,737 |
$32,783 |
$33,653 |
|
| Total state nonfarm | ||||||||||
$28,783 |
$27,789 |
$27,313 |
$27,304 |
$27,167 |
$27,928 |
$28,575 |
$29,046 |
$31,504 |
$33,922 |
|
Average Hourly Wages of Washington Construction Wage &
Salary Employment, 1997
Source: Washington Employment Security Department.
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Outlook
Since the late 1980s, Washington State has experienced strong population growth and economic growth relative to the nation. This increased the average annual growth in construction employment to 5.4 percent between 1987 and 1998. Although forecasters do not expect this growth rate to be sustained in the long term, robust growth will continue in the short term. Throughout the forecast period of 2000-2020, the rate of growth in population and total employment is predicted to slow down gradually. These two factors suggest that both residential and non-residential construction demand will decline, and consequently, construction employment will moderate. Some of this decline will be offset by rising incomes and subsequent demand for more expensive housing and remodeling. In addition, future prospects for low, stable long-term interest rates and inflation contribute to increased levels of investment in both residential housing and non-residential building sectors.
According to the Washington State Office of Financial Management and Employment Security Department, construction employment in the year 2010 will comprise only 5.1 percent of total nonfarm wage and salary employment, slightly less than the historical proportion of 5.2 percent. By 2020, construction’s share is predicted to drop further to a 4.7 percent share of total wage and salary employment.
Washington Construction Wage & Salary Employment Forecast,
2000-2020
Sources: Washington Office of Financial Management, Washington Employment Security
Department
