Dive Brief:
- Sixty-five percent of contractors expect the data center construction market to grow over the next 12 months, compared to 8% who think it will shrink, according to the Associated General Contractors of America’s 2026 construction hiring and business outlook, released on Jan. 8.
- Contractors are also increasingly bullish about power projects, the only other sector to post a higher reading than in 2025. Outside these two groups, firms reported weaker sentiment.
- For example, contractors’ outlook for transportation and infrastructure on the public side weakened over the past year, as did expectations for warehouse and multifamily projects in the private sector.
Dive Insight:
AGC’s survey on hiring and business gives more granularity to the evolving outlook for construction in 2026, particularly when it comes to labor.
The uneven forecast arrives as firms expect labor challenges to linger in 2026. For example, about 82% of firms report difficulty filling hourly craft positions and 80% struggle to fill salaried roles.That has led to project uncertainty, with about 60% of respondents saying a project has been postponed or canceled within the past six months.
During a webinar to present the survey’s findings, panelists talked about an industry with booming demand for certain types of builds, particularly data centers and power projects that support those facilities. But for contractors outside of that boom, deep-rooted challenges are once again top of mind.
The share of firms struggling to fill open positions climbed to its highest level in the past three years, said Ken Simonson, chief economist at AGC. That’s a big concern, coupled with the fact that seasoned pros are starting to leave the workforce, said Kyle Van Slyke, chief operating officer at Musselman & Hall Contractors, an Overland Park, Kansas-based construction company.
“Our biggest challenge is this workforce,” said Van Slyke during the call. “The senior leadership that continues to retire and not be replenished is really hurting our market.”
Immigration enforcement has also begun to impact workflows on jobsites.
About 33% of firms reported being affected by immigration enforcement actions in the past six months, either through workers no longer showing up or subcontractors losing labor. Another 6% of firms reported instances of Immigration and Customs Enforcement officers showing up at a jobsite or office.
Tariffs are also a thorn in contractors’ sides.
Roughly 70% of contractors said tariffs affected business in 2025, per AGC’s outlook. That prompted 40% of firms to raise bid prices and about one third to accelerate materials purchases. About 35% firms passed most or all tariff-related costs to owners, though 11% said they absorbed most or all of the tariff costs, according to the survey.
“2026 offers a handful of clear bright spots amid a growing number of challenges, reflecting the mixed outlook reported throughout the survey,” AGC CEO Jeffrey Shoaf said during the call. “Association officials continue to urge the administration and Congress to address construction workforce shortages in both short term and long term measures.”
