NCPA - National Center for Policy Analysis

Why Is Industrial Construction Declining?

May 4, 1998

Some economists are puzzled by the fact that in these economic boom times, industrial construction has been declining steadily for the past three years. Housing starts and commercial construction are up, and manufacturing output has been growing far faster than it did a decade ago, so why aren't more factories being built?

  • Some analysts suggest that the answer lies in the overtime statistics, which indicate factory managers are adding more shifts, rather than building more plants.
  • In the late 1980s, industrial overtime averaged about 3.8 hours per week.
  • In recent quarters it has averaged about an hour more than that.

This can be seen in the auto industry, where 6 percent of vehicles assembled in North America last year resulted from overtime production -- equivalent to the output of an additional 4.4 auto plants running on straight time.

Source: Gene Koretz, "Overtime vs. New Factories," Business Week, May 4, 1998.


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