Excavation Work

SIC 1794

Industry report:

This category covers special trade contractors primarily engaged in excavation work and digging foundations, including digging and loading. Contractors in this industry may also perform incidental concrete work. Contractors primarily engaged in concrete work are classified in SIC 1771: Concrete Work. Those primarily engaged in trenching or in earth moving and land clearing not related to building construction are classified in the major group for heavy construction other than building construction, contractors.

The status of the U.S. excavation industry generally mirrors the country's economic climate, in particular the demand for construction of detached single-family homes. Single-family homes typically accounted for more than one-third of the value of all excavation work in the United States, while other commercial buildings represented less than one-fifth and educational buildings less than one-tenth of excavation work.

In 2009, the U.S. excavation work industry included more than 40,750 establishments that generated over $26.3 billion in revenues. Almost 88 percent of the industry employed fewer than 10 workers, but 12 percent of establishments that employed 10 or more were responsible for nearly two-thirds (65 percent) of all industry revenues. The primary costs of doing business in the excavation work industry are materials components, supplies, and payroll. Other costs include electricity; rental cost for machinery, equipment, and buildings; and cost of repairs to machinery and equipment.

The U.S. excavation work industry benefited from the sustained demand for single- and multi-family housing in the early 2000s. The recession of the early 1990s had resulted in a drop in housing starts to just 1.01 million in 1991, but the economic recovery that began in 1992 helped housing starts rise each year to a peak of 1.46 million in 1994. While starts dropped to 1.35 million in 1995, they rose to 1.45 million in 1996. In 1998, housing starts matched the 1996 number of 1.45 million, down slightly from the previous year. By 2002, however, housing starts had reached 1.7 million, 1.36 million of which were single-family, and 346,900 of which were multifamily.

Because residential construction trends were up throughout the United States in the early 2000s, excavation work in these areas was booming despite a sluggish economy. Most growth occurred in the South and Southwest, which had experienced the strongest population growth in the United States during the 1990s and early 2000s. Among the top 50 markets, many of which experienced annual growth of 20 percent or more, were Dallas and Houston, Texas; Phoenix, Arizona; Atlanta, Georgia; and Las Vegas, Nevada. Florida led the way in growth, attracting aging baby boomers who were looking for retirement homes or communities in warmer climates.

Housing starts continued to rise, reaching 1.84 million in 2003 and 1.95 million in 2004, followed with 2.06 million in 2005 before plummeting to 1.8 million in 2006 and 1.35 million in 2007, of which 1.04 million were single-family, and 309,200 of which were multifamily. The downturn was expected to affect excavation contractors as well.

According to industry statistics, an estimated 42,300 special trade contractors were primarily engaged in excavation work and digging foundations, including digging and loading, with an industry-wide workforce of 226,100 employees in 2007. Excavation work accounted for nearly $20 billion of the nearly $28 billion in total industry revenues. Contractors engaged in excavation and grading (building construction) engaged in work valued at nearly $8 billion. Pennsylvania, Ohio, Michigan, California, and New York had the majority of excavation contractors.

Current Conditions

By 2008, the United States faced a perfect storm of economic conditions that sent the country spiraling into a recession. Oil prices spiked to record highs in the summer of 2008, reaching above $140 a barrel. Banks experienced a credit crisis, which rippled into the housing market. By 2009, the bubble had burst on the housing market, and new housing starts plummeted to a 50-year low of 554,000, the lowest since the government began tracking housing construction in 1959.

According to an August 2010 report by Reuters, the commercial real estate market was able to avoid sudden onslaught of foreclosures that occurred in the housing market. Although credit remained tight in 2010, improvement could be noted during the first two quarters of 2010. Namely, employment in commercial construction was up during the first half of the year. However, industry insiders did not expect 2010 to bring significant overall recovery to the commercial build market. Citing a report by Reed Construction Data, the Association of General Contractors noted in June 2010, "Commercial construction should prepare for starts to have little to no decline over 2010, but should prepare for expanding bid opportunities."

Despite some positive movement in the commercial sector, after the first two quarters of 2010, residential construction remained severely depressed. According to a report by the National Association of Homebuilders, in July 2010, residential construction lost 16,900 jobs. Although a negative, the loss was less than the 27,700 jobs lost in July 2009 alone or the 81,700 jobs lost in November 2008 alone. Residential housing, which showed some signs of recovery, slowed again during the second quarter of 2010, especially after the expiration of a home buyer tax credit.

Industry Leaders

Small, independent operators remained the backbone of the excavation work industry. They generally worked as subcontractors to home building companies and commercial construction firms. Nevertheless, several large companies held dominant market positions in this industry, although they tended to be regional rather than national in scope. Top companies in the excavation work industry included Glasgow Inc., in Glenside, Pennsylvania; George J. Igel and Company, Inc., in Columbus, Ohio; Beaver Excavating Company, in Canton, Ohio; and Independence Excavating, Inc., of Cleveland, Ohio.

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