The construction labor market may finally be showing signs of easing after years of severe labor tightness, but contractors appear unwilling to let workers go, a trend reflected in new state unemployment data released by the Associated Builders and Contractors.
March construction unemployment rose from a year earlier in 44 states, according to an ABC analysis of U.S. Bureau of Labor Statistics data, while separate labor and spending indicators suggest businesses are moderating labor force growth rather than shrinking overall.
The national non-seasonally adjusted unemployment rate for construction hit 6.7% in March, up 1.3 percentage points from March 2025, according to ABC analysis. Only Louisiana and Ohio reported lower estimated construction unemployment rates than a year earlier, while 44 states reported increases.
ABC noted that the numbers are estimates derived from household survey data because monthly statewide construction unemployment numbers are not produced directly by the BLS.
“The numbers are not seasonally adjusted, so it’s important to compare the same month in different years rather than between months, as construction employment fluctuates greatly with the season,” said Kenneth Simonson, chief economist for the Associated General Contractors of America.
But broader employment indicators show a more complicated picture. National payroll construction employment remained 58,000 jobs above year-ago levels, marking a 12th straight month of annual gains, although gains remained below 100,000 workers. Seasonally adjusted construction employment stood at 8.3 million workers, or 9.3% above its pre-pandemic peak.
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Job openings, demand indicators diverge
Job openings and hiring activity suggest a gradual rather than abrupt cooling of the labor market. Construction job openings totaled 224,000 in March, up from February but down 54,000 from a year earlier, according to data from the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey.
“I think a more significant indicator of worker demand is the Job Openings and Labor Turnover Survey, which has consistently shown weak hiring and job openings, but also very low attrition rates,” Simonson said.
Hiring improved month-on-month to 308,000 positions, while layoffs and attrition remained below year-ago levels. ABC Chief Economist Anirban Basu previously described February as the month with the least construction labor movement since the BLS began tracking the data in 2000, reflecting historically slow hiring activity along with limited worker movement.
A higher unemployment rate does not necessarily mean a large influx of available workers. Instead, the data increasingly points to a lower turnover environment in which companies hire more selectively while retaining existing teams.
A March analysis by the Associated Builders and Contractors found that construction unemployment rates rose from a year earlier in 44 states, with the national rate up 1.3 percentage points.
Chart: ABC/Markstein Advisors
Demand indicators have also softened.
National nonresidential construction spending fell 0.2% in March, with spending falling in nine of 16 nonresidential categories. Private nonresidential activity fell more than 2 percent from a year earlier, according to ABC’s analysis of construction spending data from the US Census Bureau.
“While a large part of the ongoing decline is due to the ongoing decline in manufacturing-related construction activity, the weakness is becoming more widespread,” Basu said.
The slowdown in manufacturing has been particularly pronounced. Manufacturing construction spending fell 17% year-on-year in March, according to the accompanying ABC spending analysis.
Basu said data centers and related energy projects remain among the strongest segments of construction, while opportunities in privately financed construction have softened. He noted that multifamily, office and residential activity remains limited, even healthcare construction has moderated. However, data center construction spending increased 34.3% year-on-year and remains one of the strongest drivers of growth in the sector.
“Electricians are the hardest positions to fill, as data center projects compete for thousands of them per position and often pay enough to pull workers away from less urgent projects,” Simonson said.
Despite the weaker spending and labor indicators, by and large contractors are still reporting substantial work under contract. ABC’s gauge of construction backlog rose to 8.6 months in March, up from 8.1 months in February and slightly above year-ago levels.
ABC economist Bernard Markstein attributed some of the slowdown to macroeconomic pressures, including rising energy costs associated with the Iran conflict, rising insurance premiums, labor costs and high debt levels.
“The Iran war and the resulting rise in energy prices are negatively affecting the construction industry,” Markstein said, adding that some projects have been scaled back or delayed.
