Constructionrelated Archives - Colorado-based Business and Economic Research

Colorado Construction employment peaked in 2006 and has been on a downward path since. Not seasonally adjusted data topped 175,000 jobs in 2006. Today, there are 102,000 workers, comparable to mid-1995.

The large number of foreclosures and reduction in housing prices brought the construction of single family housing to a screeching halt. Approximately 9,500 permits will be pulled in 2011, up from the trough in 2009 (7,231). This is a far cry from the peak in 2004 (40,753).

Because it is difficult for geographically large states to develop distinctive competencies in construction, the concentration or workers, or location quotient (LQ), should be near 1.0. (A location quotient is the ratio. It is the percentage of state construction workers divided by the percentage of U.S. construction workers).

A LQ greater than 1.0 indicates a higher concentration of construction workers, much as the state has had for the past 20 years. On the other hand, a LQ less than 1.0 means Colorado has less of a concentration, much as occurred at the end of the 1980s because of overbuilding.

The state LQ for construction workers remained below 1.0 through mid-1991. It increased for the next 10 years (2001) to about 1.5. In early 2001, the LQ began declining and dropped off sharply for three years (2004). It leveled off for five years, then plummeted again in 2009.

How low will the LQ go? In theory it is reverting to 1.0. As the country recovers from the Great Recession, other sectors will expand at a faster, thus driving the LQ lower. It will rise again when Colorado experiences another strong expansionary phase.

The following is an excerpt from Colorado’s Construction Industry – Impact Beyond the Hammers and Nails olorado’s construction and related industries employ one-in-six private-sector covered workers, yet almost 60% of the net jobs lost between 2007 and 2009 were in these sectors.

What type of economic activity is necessary to generate enough construction and construction-related activity to recoup these losses, particularly given the state of Colorado’s housing and commercial markets? (Note: this does not suggest that construction is primary or export industry or that is could or should be).

A financial analyst might suggest that the risk or volatility associated with the construction industry could be reduced if Colorado had a larger, more diverse economy. Therein lies the paradox. Because Colorado is a growth state, it is necessary to have a construction industry to support the current base of five million people and build the homes and buildings that would support a larger, more diverse economy. The Colorado State Demography Office projects continued population increases in the range of 1.5% to 2.0% for the extended future. (Population projections can be found on the State Demography Office website ).

Even with the recent reduction in state construction workers, the 2009 location quotient is 1.29, down from 1.44 in 2001. Because the industry is not considered a primary or export industry, at some point the location quotient will eventually revert to 1.0. At that time Colorado will have a concentration of construction workers comparable to most other parts of the country. Keep in mind that this correction will likely include a comparable adjustment in the related industries identified in this study.

Construction is necessary for the expansion and maintenance of the Colorado economy. It is essential that economic development, public, and private leaders understand the relationship between construction employment, its related sectors and the overall economy. That includes awareness of the volatility of the industry and the likelihood that construction employment will ultimately return to a location quotient of 1.0.

Tag: Constructionrelated

Concentration of State Construction Workers Declining

1 in 6 Colorado Jobs are Construction or Construction-Related