Macroeconomic labour productivity and its impact on firm's profitability

The construction industry is one of the largest sectors in the U.S. economy, yet little is known about the key macroeconomic parameters that affect its industry’s structure and performance. The main objectives of this research are 1) to analyze the macroeconomic performance of construction industry as a whole and at fourteen of its sub-sectors in terms of labor productivity, gross margin, and worker’s wages; and 2) to develop a quantitative model that predicts a firm’s profitability by analyzing various levels of labor productivity. The results of a non-linear regression analysis based on the comprehensive U.S. Economic Census data show that the construction industry’s sub-sectors with the highest productivity are the most profitable with regard to the gross margins that they are able to generate. This study and its model will help decision makers better assess macroeconomic performance and conduct trend analysis of the construction industry to serve as a basis for developing strategic roadmap for the future.