Issue 53 – Third Quarter 2025
The longest federal government shutdown in U.S. history ended on Nov. 12, yet it will take several more weeks before public data releases return to their usual recency. For the construction industry, this period of reduced data visibility comes at a perilous moment; construction spending has been in steady decline for most of 2025, hiring remains anemic, and materials prices are once again rising. With policy uncertainty still elevated and the interest rate outlook far from clear, it could be a difficult few quarters for the industry.
The Good
Data Center Construction
Data center-related construction spending, up 356% over the past five years, continues to provide the industry with much needed momentum. While growth has been modest over the past several months, ongoing growth is likely well into 2026. Notably, contractors who report being under contract to work on data centers have a significantly longer backlog than those who do not, according to the Associated Builders and Contractors Construction Backlog Indicator.
The Strictly Okay
Manufacturing Construction
Manufacturing-related construction spending has declined in seven straight months and is down 8.2% from the August 2024 record high. With CHIPS Act megaprojects concluding and trade policy and related uncertainty weighing on manufacturing activity, this descent will likely continue well into 2026. That said, it should be noted that manufacturing-related construction activity is still extraordinarily elevated relative to historical levels.
The Bad
Construction Employment & Labor Supply
While the construction industry added 19,000 jobs in September, ending a streak of three straight monthly declines, hiring has been exceptionally slow in 2025. Construction employment has grown by just 2,000 positions since March. Job growth has been particularly sluggish in the residential segment, although nonresidential hiring has also slowed in recent months. Given ongoing declines in construction spending, job growth is likely to remain weak over the coming months. .
The Ugly
Materials Prices
Construction materials prices were stable throughout 2024 but have started to rise again in 2025. As of September, input prices had risen for five straight months, the longest such streak since 2022, and were up 3.5% on a year over year basis. While that represents a modest increase compared to the escalation experienced in 2021 and 2022, it’s clear that prices are once again rising too quickly. There is substantial uncertainty regarding both tariff rates and how and when those taxes will affect materials prices, and that uncertainty makes it difficult to predict just how fast materials prices will rise over the next several quarters.
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