housing prices

What Drives Employment in Forestry and Wood Processing?

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Brent Sohngen (Professor, AED Economics, Ohio State University, Sohngen.1@osu.edu)

After 200 years, paper-making in Chillicothe, Ohio will end in August 2025 when Pixelle closes a mill there. Like so many other places, Chillicothe is losing a business that has been part of the community for generations. This eventuality could have happened 20 years ago when the Dayton-based Mead Corporation merged with Westvaco. The combined company later sold the plant to a private equity firm. Yet, the plant hung on, even as it changed hands a couple times before landing with Pixelle Specialty Solutions in 2018.

Now apparently, it really is at its end, and with it 800 jobs.  I’m sure the Ingham brothers, whose ingenuity at using water power to mechanically create pulp in the early 1800s, and Colonel Daniel Mead, whose name adorned the plant for over a century, never imagined their legacies would last so long, but the companies they created certainly stood up to the test of time.

Unfortunately, legacies like this are falling all over the US and the world. Pulp mills are increasingly going extinct. And it’s not just mills working with virgin material from the forest. Greif Industries is eliminating capacity in the recycling sector. Something is going on out there in the forest economy, and small towns like Chillicothe are in the cross hairs.

One has to ask whether this is the start of a new downward spiral in wood harvesting and employment in the United States, similar to what happened from the late 1990s to 2010 (Figure 1), or whether it is a temporary blip.  After all, US employment in wood processing stabilized after 2010 and even grew a bit.

Figure 1: US employment in wood and paper manufacturing (NAIC Codes 321 and 322). Data from the Bureau of Labor Statistics (data.bls.gov).

So what are the drivers of  employment in this sector? Aside from demand and technology, three key supply side components play an important role: access to raw material, access to workers, and access to energy.

Let’s start with access to raw materials – namely trees. Figure 2 presents total harvests and the inventory of harvestable tree volume in the United States since the early part of the last century. Wood harvesting generally increased, with big dips during the Great Depression (1931-32) and the Great Recession (2006-08).

Figure 2: US Timber Production and US Timber Volume. Authors calculations from various sources.

The slowdown in harvesting early in the twentieth century, from 1905 into the 1920s, happened because wood supply was lacking (too young or too remote) and because labor became scarce. Wood resources in the populated eastern US had been depleted by over a century of relentless westward movement, and while forests were regrowing on abandoned agricultural land, it would take time for stocks to build. Though big trees were plentiful in the west, they were costly to access in the early 1900s because the necessary infrastructure was not yet built.

Costs were further increased by labor constraints when World War I broke out and many young laborers were sent to war. As a a result, employment in wood products, including pulp and paper, fell from more than 1 million people in 1914 to 890,000 in 1921 (US Census of Manufacturers, 1930).

After 1990, the downward trend in harvesting happened for different reasons: forest preservation and demand contraction. Starting in 1990, 15% of the nation’s timber supply was lost when harvesting ceased on National Forests due to administrative fiat. Employment in wood processing fell in regions most heavily affected by these forest set-asides – including Oregon, Washington, California, and other western states. The resulting dip in employment can be seen in the national data (Figure 1).

However, even bigger economic changes were underway. Demand for paper began to feel the pinch as society moved online. In 2006, housing markets faltered because of rising interest rates, and by 2008, the bottom fell out when Lehman Brothers went bankrupt and the stock market cratered. A crippled economy caused housing starts and wood demand to plummet. Employment in wood processing, and especially pulp processing, fell.

No doubt, access to trees affects employment – just witness what happened in the eastern US at the beginning of the twentieth century and the Pacific Northwestern US at the end of it – but tree supply is not a problem today. Trees are literally everywhere. Even as harvesting expanded in the US, timber inventories grew across the last century (Figure 2).

What’s most surprising about the last century is that the U.S. experienced a massive run-up in wood harvesting from the 1930s through the 1990s and wood inventories increased! How is that possible?

The answer lies in plantations, and the many investments forest companies made in improving the growth of trees.  Now, over 16 million hectares (40 million acres) of fast-growing plantations have been established in the US, especially in the South where tree growth is fastest (Figure 3). Not coincidentally, this region is home to many of the largest, most technologically advanced lumber and pulp mills in the world, which located there to be close to the trees.

Despite a surfeit of trees, and falling wood prices (Figure 4), wood processing mills are closing all over the US these days, including the South. It turns out that access to trees isn’t everything in the wood processing sector. Employment today is more dependent on labor costs, labor skills, interest rates, technology, and consumption patterns.

Figure 3: US forest growth by state. Authors calculations derived from US Forest Service Forest Inventory and Analysis database (https://research.fs.usda.gov/programs/fia).

 

Figure 4: US South stumpage prices. Authors calculations from (Haynes, 2008) and Timber-Mart South (https://timbermart-south.com/).

 

The US has proven itself to be competitive in growing trees. For a long time, this competitive advantage translated into strong growth in the wood products sector, especially in the US South, but also in other regions. Yet the competitive advantage seems to now be eroding. Unlike last century, when limitations in the supply of trees created bottlenecks, today the primary factors affecting employment in wood processing have largely to do with pressures external to the forestry sector.

Beyond the forestry sector, this shift creates a dilemma for the environment. Southern forests have become the powerhouse of US forest carbon sequestration because demand has encouraged investments in fast-growing forests. If wood prices keep falling in real terms, it is hard to see how this level of investment remains profitable.

In recent years, the US has become the supplier of choice for wood pellets used to generate renewable electricity in Europe. Although this market has grown, stumpage prices in the South have continued their downward march. Deeper investments in pellet-based boilers and the emerging mass-timber sector could reverse this price trend (see Favero et al., 2023; Lan et al., 2025), but investments in capacity for mass timber and wood-based biomass energy have not been strong enough to date to switch the current price trend.

So what does this mean for a  place like Chillicothe, Ohio, which hung onto its pulp mill for over 200 years even as America’s wood basket moved south and west in the 1900s? Raw materials can be shipped into the region, so the factors that are going to drive new investments are labor force, energy, and regulation. In this environment, it turns out that the real competition for wood products manufacturing isn’t even other wood processing facilities, but companies in the rest of the economy that are competing for the same set of workers.

 

References

Favero, A., Daigneault, A., Sohngen, B., Baker, J., 2023. A system-wide assessment of forest biomass production, markets, and carbon. GCB Bioenergy 15, 154–165.

Haynes, R.W., 2008. Emergent lessons from a century of experience with Pacific Northwest timber markets, General Technical Report. US Department of Agriculture, Forest Service, Pacific Northwest Research Station, Portland.

Lan, K., Favero, A., Yao, Y., Mendelsohn, R.O., Wang, H.S.-H., 2025. Global land and carbon consequences of mass timber products. Nat. Commun. 16, 1–12.

 

 

Where will the trees come from? How tariffs and new policies mean big changes on federal forests.

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by Brent Sohngen (sohngen.1@osu.edu)

In this post:

  • An assessment of the President’s recent executive order promoting timber harvests from federal lands to replace the 1.5 to 2 billion ft3 we import from Canada if tariffs reduce those flows.
  • Federal harvests provided 2 billion ft3 per year, 15-20% of U.S. timber, until the early 1990s, but were reduced for environmental reasons. Now they provide 0.3 billion ft3 per year.
  • Stocks have since grown significantly on these left-alone lands, and about 100 billion ft3 is reasonably available for harvest in the next few decades.
  • Harvesting levels of 0.9 to 1.3 billion ft3 per year would equal current growth and fire losses on these hectares and would promote thinned and younger stands that would be more resilient in the future.
  • There are environmental risks to building such a program that should be carefully weighed.

Now we know how the Trump administration plans to combat the effect of higher tariffs on wood prices: Harvesting more timber from federal forestlands, predominately in the western U.S. This approach would reverse thirty years of modest harvests from these forests, which began in the 1990s when the Endangered Species Act was invoked to slow down timber production in old growth forests that housed the Northern Spotted Owl (Strix occidentalis caurina).

Throughout their history, federal forests have been a punching bag, swinging back and forth between periods of protection and intensive logging as environmentalists and loggers duked it out in the court of public opinion and in front of judges. In the early 1900s, it was President Roosevelt who worried that lumberman and fires would destroy the great western forests and deprive future generations of habitat and boards. He set-aside millions of acres from the sawyer’s blade and hired forest rangers who tirelessly stood watch over their nation’s investment.

It turns out, back then, that logging was not much of a problem for federal forests. Sure, logging happened, but federal forests were remote and demand for industrial wood was modest in an era when population and income were far lower. Nature was a bigger “problem,” as 41 million acres per year burned before 1945.

Government set about slowing these conflagrations, hiring hearty soles, including servicemen returning from World War II, to put up a fight. Despite serious setbacks, like the Mann Gulch fire in 1949 that took 13 honorable lives, brave hand crews, hotshots, smokejumpers, and the like cut fires to 3 million acres per year by the 1970s.

What happened to all that wood saved from fires? Much of it made its way into houses and other products when the federal government built up a massive timber harvesting operation in western forests to meet growing demand during the post-World War II economic boom. By the 1970s federal harvests constituted 22% of softwood timber production in the U.S. In communities across the western landscape, forestry became a way of life, with booms and busts regulated by the number of housing starts.

But in 1991, all this came to a stop when Judge Dwyer ruled against the Forest Service, requiring changes in logging practices to save endangered species. Practically overnight, logging ceased on federal lands throughout California, Oregon, and Washington. They have remained low ever since as the Forest Service shifted its perspective.

These changes could not have come at a worse time for the American economy, which grew apace in the 1990s. Timber prices soared to new highs but mill towns in Oregon and Washington saw little benefit as log piles diminished. In 1993, President Bill Clinton chaired a timber summit in Portland, Oregon to make good on an election promise, but his words could not mend the obvious: a deep structural adjustment was underway, driven by a new calculation that favored owl habitat over tree cutting on federal lands.

Fortunately, for aspiring homeowners in the US, lumber poured in from Canada. The Canadians had plenty of trees and were keen to sell them. Lumber prices came back down as imports ramped up to 30% of lumber consumption by the early 2000s. The proportion has fluctuated a bit but remained close to this level ever since.

The question now is, what happens if tariffs reduce wood imports from Canada? Will prices stay high or can the US increase wood harvesting enough to counteract the market effects?
Consider federal timber lands, which have more or less been left alone since the early 1990s. These forests come under direct control of the President, who signed an executive order directing agency heads to increase logging on lands they control.

Can the US go back to the industrial-scale logging in federal forests like the 1950s through 1980s when federal harvests routinely hit 2 billion ft3 per year? Let’s look at the numbers.

The US consumes 12-13 billion ft3 of wood per year. Lumber accounts for about 55% of that, or 6.9 billion ft3. In recent years, we have imported around 1.7 billion ft3 per year. This level is down from the early 2000s when a housing boom drove imports to 2.5 billion ft3. Today, federal harvests stand at about 0.3 billion ft3 per year.

In principle, the US is capable of significantly ramping-up wood production on federal lands. With data downloaded from the US Forest Service Forest Inventory and Analysis database, I estimate that federal lands contain over 300 billion ft3 of softwoods, the key wood type imported from Canada.

We cannot access all that wood, though. About 23% is set-aside in wilderness areas and other protected places. An additional 43% is older than 120 years or in locations with slopes greater than 50 degrees. In both these cases, there are good environmental reasons not to cut. An additional 2.5% of the wood is too young to cut, so perhaps only 102 billion ft3 on 33 million acres is actually available for harvesting in a way that may not cause significant environmental damage.

That is a lot of wood. Can we cut it?

One answer is “yes” because we are already losing lots it each year to fires, which have now expanded to 7.5 million acres burned per year. Between fires and pests, 1.4 billion ft3 (1.4%) are killed annually, due in part to simple neglect. More harvesting would reduce fire and pest losses with thinned and younger forests.

How much can we safely cut? Simply cutting what grows every year would amount to 0.9 billion ft3 of wood for markets. Considering that these forests have not been managed for over 30 years, I hypothesize that we can harvest more than 0.9 billion ft3 per year and the effect on long-term volume growth will be positive. Currently, I’m assessing this with the Global Timber Model, so will have some actual analysis on that in the future.

But the current reality is that a significant amount of wood can, and probably should, be cut on public land. Based on the current inventory, growth, and dieback, I estimate that we can access 0.9 to 1.3 billion ft3 per year sustainably in the next two decades. Harvesting would also reduce forest fires.

That said, there are risks. The Forest Service has laid off lots of workers recently, and it is not clear the organization now has the capacity to manage a large and growing timber sale program. Lots of public and private infrastructure, including roads, machinery, and mill capacity, must be developed. Labor in western woodsheds has been scarce for years, so higher output will increase wages and drive-up costs.

There are also environmental risks. Road building and logging will denigrate habitat and water quality. In the haste to log, I worry that these risks will not be weighed carefully.

The carbon effects are not clear. Moving federal forests to shorter rotation ages with more harvesting could have short-term negative consequence for carbon emissions, but if management reduces fire damage and promotes increased growth rates through thinning and reforestation, the effects could be positive.

There is a way to have positive effects on the atmosphere, but it is not obvious that the Forest Service still has the personnel to ensure this outcome. And it is unlikely that the private sector, which will do the logging, has right incentives to do it well. The idea of using federal lands for more timber carries big risks.

One question folks might ask is why not harvest more on private land? Most forests and timber in the U.S. are on private land. Higher prices from tariffs could induce more harvesting there, but the tariffs must remain in place to have an effect. Landowners have inelastic supply, meaning that private wood supply will change modestly in today’s on-again, off-again policy environment.

The wildcard here is the potential federal timber harvesting program proposed through executive action. If private landowners come to believe the administration can actually pull off sustained increases in federal timber supply, logging on private lands in the east will edge up in anticipation. There is a modest overhang of mature logs in eastern forests that could enter the market in the next few years before the federal program gets up and running.

In conclusion, tariffs on wood imports from Canada would raise prices for lumber in the U.S. in the short term. We have plenty of wood available on federal forestlands, especially in the west, to expand our supplies and make up for any losses from Canada. However, it has been decades since most of these public forests have seen large-scale timber harvesting operations. Increases in harvesting can provide environmental benefits in terms of fire control and even long-term carbon storage, but there are also environmental risks to species, habitat, and the atmosphere.

Housing Prices and Tariffs on Canadian Softwood Lumber

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by Brent Sohngen (Sohngen.1@osu.edu)

Click here for roughly 5 minute podcast version of this post [Global Forest Podcast]

Understandably, there has been confusion and concern in the marketplace due to the weekend decision by the Trump Administration to impose tariffs on imports from Canada and Mexico (updated: The tariffs on both Canada and Mexico have been paused for 30 days). While exposure is significant in the automobile manufacturing sector, the housing sector will also be affected. Since the Great Recession earlier this century, the US has not built enough houses to keep up with demand. Due to limited supply of new homes, housing costs have risen disproportionately in the economy.

One factor possibly limiting the supply of new homes may be the high cost of wood, which makes up 15-25% of the cost of building and finishing a home in the U.S. A few years ago, buyers in the US experienced two significant, but short-term run ups in the price of lumber. Although we think more about our next meal than the wood frames supporting our living rooms, these price increases drove home just how important wood is in our daily lives.

What may come as a surprise to many is that the US imports about 30% of our softwood lumber, nearly all of which comes from Canada. It’s not like we don’t have enough trees in the US. We have more than enough actually. According to the US Forest Service, we grow nearly twice what we remove for timber every year. Even for softwoods – the preferred wood for framing a house – we harvest only about half what grows every year. Yes, fires have been increasing, but they are not coming close to putting a dent in the massive supply of wood piling up in US forests.

We import so much wood from Canada for a couple of reasons. First, Canada has an abundance of spruce, pine, fir (SPF) species that are extremely well suited for the US housing market. Since the Canadian market is so much smaller than the US market, much of their wood harvest makes its way through the US border. The dominant softwood type in the US, Southern pine, can be used to build houses too, but is less preferred by builders.

The US has similar types of trees in its northern tier – from Maine to Minnesota and the Pacific Northwest – but not enough is available on private land to compete with the sheer volume available in Canada. Significant quantities of the preferred SPF types are available on federally owned Forest Service lands, but timber harvesting on those lands has been limited since the 1990s. In fact, the US began importing large quantities from Canada in the 1990s precisely because the US shut down timber harvesting on federal forestlands in the west when the Northern Spotted Owl was listed as threatened.

A second reason why we import so much wood from Canada is that they subsidize timber harvesting. Nearly all forest land in Canada is technically owned by the King of England, but it is managed by the provincial governments. Timber harvests happen on land that is leased to the timber sector. When companies pay less than market rates for the timber they harvest, they are gaining a subsidy at the expense of Canadian taxpayers. When this wood makes its way to the US, it lowers prices, and benefits consumers, but it harms woodland owners and timber mill owners.

This issue of subsidies for Canadian softwood has been a long-running dispute between the US and Canada, reaching back into the 1980s at least. Since then, there have been periodic tariffs imposed by the US government and voluntary export limits by the Canadian government. During the first Trump administration, tariffs were imposed on Canadian softwood lumber. The Biden Administration maintained tariffs and increased them from 8% to 14.5% in August 2024. This most recent act seems to increase tariffs to 39.5%.

It is hard to imagine that these subsidies will not cause further increases in prices for lumber in the United States, especially the SPF material that is used so widely in construction. Most of us recall the very high prices for lumber from 2021 and 2022. These price spikes were driven by market factors well beyond the tariffs – including constraints in labor markets, difficulties in shipping goods from country to country, and other factors – but tariffs took their toll. And prices haven’t fallen back to their pre-pandemic levels. The most likely effect of tariffs on lumber prices it that they will increase. Estimates with the Global Timber Model suggest that US lumber prices could increase 2-5% in the coming weeks.

The effect on housing will take some time to play out, but higher prices will not be inconsequential. Framing lumber is 15-20% of the cost of building a new home in the United States. Other wood products are used throughout modern homes, in cabinets and other components. If wood prices increase 2-5%, the cost of a house could increase up to 1%. This does not sound like much, but in a market that is already “behind” in producing enough houses to keep up with American demand, it can have an important impact.