Idaho leads in construction as share of GDP

Agriculture isn’t the only industry that occupies a large share of Idaho’s economy; construction projects over 20 years have kept the Gem State in the Top 10 nationally for the ratio of construction to other industries within the state’s gross domestic product.

Through construction boom times, economic collapse and now recovery, large projects and flourishing home building across Treasure Valley and in Twin Falls, Pocatello, Idaho Falls, Lewiston and Coeur d’Alene kept Idaho within the Top 5 states from 1997 to 2007 and between No. 6 and 10 from 2008 to 2015, according to the Associated Builders and Contractors report “Importance of Construction to State Economies.”

Idaho had the No. 7 highest ratio of construction as percentage of its GDP in 2015.

Back in the late 1990s, construction made up 10 percent of Idaho’s GDP, and Idaho trailed only Nevada in construction as a share of its GDP.  That figure has been scaled back to 5 percent over the past 18 years, but the national average for the ratio of construction to the overall GDP has also dropped from 6.2 percent in 1997 to 3.9 percent in 2015.

ABC made its calculations based on figures from the U.S. Department of Commerce’s Bureau of Economic Analysis.

Construction accounts for 6 percent of employment in Idaho, said Don Holley, a Boise State University economics instructor.

“That’s the highest we’ve been since 2008,” he said.

But he added that growth in construction doesn’t necessarily signal growth in the overall economy.

“Are we capable of building what people want us to build?” Holley said. “In other words, is our economy growing? Are we building call centers or Boise Cascades?”

Bob Uhlenkott, chief research officer at the Idaho Department of Labor, said construction has been growing four times faster than the rest of the state’s economy in the past year. He doesn’t foresee a bubble. Even with the lowest construction unemployment rate in the country, Idaho has 12,000 fewer construction workers now than 2007, when construction made up 9 percent of all Idaho jobs.

The construction industry is struggling with a worker shortage. ABC reported that Idaho in July had the lowest non-seasonally adjusted unemployment rate for construction workers at 1.7 percent, based on statistics from the U.S. Bureau of Labor Statistics.

Construction has changed in the last decade. Residential building has shifted from single-family homes to multi-family, particularly in Ada County, said Brian Greber, an adjunct professor of economics at Boise State University. “This amounts to less construction per household, less jobs per household,” he said.

The share of construction in Idaho’s gross domestic product was between 8.1 and 10.6 from 1997 to 2001. Greber said the booming construction of that era was fueled by Micron Technology, Hewlett-Packard, the Parkcenter Boulevard business parks,  Albertsons, Ore-Ida and other high-tech growth accompanied by rapid housing construction.

Construction retreated to the 7 percent range within the overall GDP from 2002 to 2007, though Idaho remained between No. 3 and No. 6 in the nation then. Greber said while there was little growth in business during that period, Idaho saw a high rate of immigration from other states.

In no other state has construction held a higher share of the GDP over the entire period since 1997 or even in the past 10 years. Nevada remained ahead of Idaho until 2011, but slipped in just behind the Gem State in 2012 until pulling even with Idaho at 5.0 percent in 2015.

Arizona was ahead of Idaho from 2000 to 2008, Colorado from 2000 to 2003, and Florida from 2002 to 2006. Since 2009, North Dakota, Hawaii, Montana, Wyoming, Louisiana and Utah have consistently had construction fill a larger share of their GDP than Idaho, fueled to a large extent by the energy sector, said ABC economist Bernie Markstein, author of the “Importance of Construction” study.

These states have construction at between 5.4 and 7.6 percent of their economies, according to the ABC study.

Markstein said it’s healthy to have construction as 5 to 6 percent of the overall labor pool. Six to 7 percent works if a local economy has real growth, but a ratio higher than 7 percent typically doesn’t sustain the economy, he said.

Holley and Greber both said today’s construction boom does not have the same economic punch of the one in the 1990s, which reflected change in the Treasure Valley’s high-tech sector.

“While we like to see cranes in the air, as opposed to the 1990s, a lot of the infrastructure we are seeing now is shuffling chairs,” said Greber, referring to the fact that existing local companies, such as J.R. Simplot Company and Clearwater Analytics, are behind much of the construction and are moving into new buildings.