A glut of recent data indicates that the U.S. commercial construction sector has reached an all-time high in employment, but its apparent strength is increasingly concentrated in a narrow band of megaprojects that now dominate national activity.
A new risk assessment from global insurer QBE North America, backed by federal data and the latest trust and confidence readings from Associated Builders and Contractors, shows a market that looks solid at the top, but is fracturing below as labor shortages, network constraints and policy uncertainty converge.
QBE North America US Commercial Construction Outlook 2025.
According to the U.S. Bureau of Labor Statistics, construction employment is approximately 8.3 million workers, the highest since federal records began. Wages rose about 4% over the past year as companies compete for a limited labor pool.
But those workforce numbers mask growing disparities: Manufacturing, office and retail activity has softened through much of 2025, while data centers, energy facilities and a handful of industrial megaprojects keep national totals high.
ABC’s October construction backlog indicator fell to 8.4 months, its lowest level since May. Nearly 65% of contractors surveyed believe the industry is contracting, despite strength in heavy industry, infrastructure and data center work.
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Strength on paper, divergent in practice
Spending data underscores the uneven landscape. Through August 2025, total construction spending was down 1.6% from the same period last year, according to the US Census Bureau. Non-residential spending fell 1.5% year-on-year, marking the third monthly decline in four months.
ABC’s analysis of the same period shows continued weakness in the commercial and manufacturing sectors, with much of the remaining momentum tied to large industrial and digital infrastructure projects.
Forecasts indicate that annual totals will reflect this slowdown. FMI, an engineering and construction consulting and investment banking firm, expects full-year nonresidential facility construction in 2025 to end roughly 2% below 2024, followed by a more than 0.5% decline in 2026.
Manufacturing, which grew from $75 billion in 2020 to roughly $225 billion in 2025, is forecast to end the year with a 4.7 percent decline compared to 2024 and another 3.7 percent in 2026.
Dodge Construction Network startup data highlights industry divide. In the 12 months ending in October, total construction starts rose 8%, but commercial starts rose nearly 27%, while institutional work was flat and manufacturing fell more than 16%. The increase is primarily due to billion-dollar-scale projects, not broad-based business improvement.
One example is Venture Global LNG’s CP2 export terminal in Cameron Parish, Louisiana, which received federal go-ahead in May.
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As ENR previously reported, early construction is underway at the 1,150-acre site, which includes 36 liquefaction trains, four storage tanks, two marine berths, a 1,440 MW power plant and 90 miles of pipeline. The project, led by Worley, could cost up to $28 billion. Megaprojects like CP2 are increasingly shaping statistics at the national level.
ABC’s October readings reinforce the divide. Contractors working in data centers report 10.9 months of delay, compared to 8.0 months for companies not active in the segment.
The heavy industrial portfolio rose to 8.8 months and infrastructure reached 9.8 months, among the highest in the ABC series. The commercial and institutional portfolio remained at 8.5 months, a flat trend consistent with the slowdown in demand.
Recent corporate disclosures reinforce the concentration of work in large and technically complex sectors. Turner Construction, part of Spain-based ACS Group, reported that its sales grew 43% in the first nine months of 2025 on a currency-adjusted basis, driven mainly by data centers and biopharmaceutical projects.
Turner’s backlog rose 20% to 34.4 billion euros, about $37.8 billion, according to ACS filings. Across the wider ACS group, more than half of new orders now come from digital infrastructure, energy infrastructure and defence, underscoring how a relatively small set of megaproject categories sustains much of today’s domestic construction volume.
Labor and costs reduce delivery
Labor shortages continue to mark the operating environment: The Associated General Contractors 2025 Construction Hiring & Business Outlook survey found that about two-thirds of respondents expect the shortage to persist. to 2026.
Similarly, ABC estimates that the industry will need to attract an additional 500,000 workers next year due to a persistent shortage of skilled labour. QBE notes that about a quarter of the construction workforce is foreign-born, a larger proportion than the total workforce, leaving the sector vulnerable to changes in immigration enforcement and visa processing.
In practical terms, the administration’s drive to deport undocumented workers, coupled with an assessment by the National Association of Home Builders and Institute of Home Builders of a retirement-related ticking time bomb — more than a fifth of U.S. construction workers are 55 and older — is further accelerating attrition rates. These pressures are especially evident in fast-growing states like Texas and Florida.
Rising material and equipment costs have added to the strain. ABC’s November update shows construction input prices rose 3.5% from last September, driven by higher costs of electrical equipment, steel, copper and transport; cost that many economists attribute to President Trump’s tariff scheme.
Manufacturers and contractors working under fixed-price contracts signed before this year’s price hikes now face tighter contingencies and more frequent renegotiations with owners.
Still, optimism is a buoy. Although ABC’s construction confidence index eased to 60.1 for staffing expectations, the figure remains well above the 50-point threshold, indicating growth. — but this indicator has moderated as companies prepare for further tightening of labor markets and continued cost pressure.
Data centers redefine ‘commercial’ construction
Data centers are reshaping commercial construction more dramatically than any other segment. A 2024 Electric Power Research Institute study supported by the US Department of Energy estimates that US data centers now consume more than 4% of national electricity, a share that is expected to rise to 12% by 2028.
The increase in energy demand is already affecting project timelines. Mortenson Executive Vice President Maja Rosenquist noted that several hyperscale facilities delayed their progress even after starting because of the companies’ inability to meet power supply schedules. Additionally, increased AI workloads are causing mid-project redesigns of electrical and cooling systems, as previously reported by ENR.
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Burns & McDonnell’s data center practice lead Christine Wood told ENR that hyperscale construction schedules are increasingly “out of step with the pace of development of transmission and power infrastructure”, calling the mismatch a “critical constraint”.
Public services confirm the stress. In July, Dominion Energy, which hosts about 13 percent of global data center capacity in northern Virginia, saw its power capacity nearly double over the past year, from 21.4 GW to 40.2 GW. Water use is just as significant: A large-scale campus can require up to 5 million gallons per day, according to the Institute for Environmental and Energy Studies.
These dynamics help explain why business starts appear strong in national data despite weakening office, retail and small-format business markets. They also shift risk to interconnection deadlines, regional transmission capacity, long-term electrical equipment procurement and water availability.
While federal incentives under the Jobs and Infrastructure Investment Act, CHIPS and Science Act, and the Inflation Reduction Act continue to support many of the megaprojects that sustain the market, several large funding pools are now fully committed or nearing their limits, raising concerns that key programs could be cut over the next 12 to 18 months even as statutes remain in place.
If notices to proceed begin to decline faster than backlogs can be replenished, contractors could face a “funding hangover” starting in 2026.
With ABC reporting that nearly two-thirds of contractors believe the industry is contracting, and with the strength of the backlog concentrated in data centers, heavy industrial work and infrastructure, the central question is not whether the overall construction market will continue to grow, but whether continuing to increase data center capacity hides a general weakness that should not be overlooked.
