News Summary
The construction industry is navigating a tough environment with projections indicating a challenging second half of 2025. Rising costs, persistent labor shortages, and recent declines in construction activity are pressuring various private nonresidential construction segments, with market shifts impacting demand. Contractors face project delays and cancellations due to tariffs and workforce shortages, compelling them to raise wages to retain talent. Anticipated interest rate decreases may affect future construction demand, but stakeholders must remain adaptable in the face of inflation and escalating material costs.
Washington D.C. – The construction industry is facing an increasingly challenging landscape, with forecasts predicting a difficult second half of 2025. Anirban Basu, chief economist of the Associated Builders and Contractors (ABC), indicates that recent declines in construction activity may be more severe than current data suggests. The issues affecting the industry stem primarily from rising costs and persistent labor shortages.
Most private subsegments of nonresidential construction are losing momentum. The lone exceptions are religious projects, which comprise less than 1% of overall activity, along with power projects that are being fueled by surging demands from data centers. Recent figures reveal that private nonresidential construction spending has decreased by 3.7%, contrasting with a 3.1% increase in public nonresidential spending observed over the last 12 months.
Specifically, July data indicated that spending on commercial projects fell by 0.8%, while manufacturing-related construction spending saw a decline of 0.7%. Amid these declines, approximately 16% of contractors reported experiencing project cancellations, postponements, or scale-backs as a direct result of tariffs. Alongside this, 45% of contractors indicated facing delays primarily due to labor challenges. Policy changes regarding federal funding, taxes, and regulations were cited by 26% of firms as a reason for altered project demand.
Labor shortages and increased costs of materials have continued to plague the construction sector. A significant survey revealed that one in four ABC members experienced project interruptions or cancellations as tariffs preemptively impacted their operations prior to the implementation of increased import taxes in August. This has exacerbated an already strained workforce situation, with the U.S. construction workforce reaching 8.3 million in July 2024, surpassing preceding levels, but still encountering significant talent shortages.
While construction spending in manufacturing has doubled since late 2021, challenging market conditions remain a significant concern. Factors driving growth in certain construction segments include a shift toward near-shoring and supportive government policies introduced through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS Act. However, in-demand sectors, such as advanced manufacturing, healthcare, life sciences, and data centers, are also grappling with escalating costs and the ongoing competition for skilled labor.
Contractors are increasingly compelled to raise wages as a strategy to retain their workforce, despite the pressure on profit margins. Geographic competition for specialized labor within the construction industry is heightening as firms attempt to secure skilled workers. Advanced markets like healthcare and life sciences are particularly affected by volatile pricing and extended lead times for necessary equipment, presenting further challenges for project execution and timelines.
Looking ahead, the demand for construction projects may be influenced by anticipated decreases in interest rates coupled with ongoing federal investment. Firms will need to navigate the dual challenges of optimizing resource allocation while contending with the impacts of inflation and rising material costs. As the construction industry braces itself for an uncertain future, stakeholders are urged to remain adaptable in the face of these emerging challenges.
Deeper Dive: News & Info About This Topic
HERE Resources
Kim Sajet Appointed New Executive Director of Milwaukee Art Museum
La Center Teachers Initiate Strike Over Pay and Conditions
Norfolk School Board Proposes Significant School Closures
Owensboro Implements New Property Maintenance Standards
Transformations in Ohio’s Construction Industry
New Britain Parents Struggle With Bus Service Issues
Evergreen Public Schools Closure Amid Ongoing Strike
Trump Administration Considers Tariff Exclusions on Construction Supplies
Community Unites in Support of Students Affected by Flooding
Construction Industry Faces Workforce Shortages Amid Immigration Challenges
Additional Resources
- Nixon Peabody: California Construction Challenges Amid Rising Demand
- JLL: Growing Industry Sectors Face Unique Construction Challenges
- Autodesk: Construction Innovations
- Deloitte: Engineering and Construction Industry Outlook
- For Construction Pros: A Perfect Storm of Challenges in the Concrete Industry
- Wikipedia: Construction Industry
- Google Search: Construction Industry 2025
- Google Scholar: Construction Industry Trends
- Encyclopedia Britannica: Construction
- Google News: Construction News
Author: STAFF HERE MILWAUKEE WRITER
MILWAUKEE STAFF WRITER The MILWAUKEE STAFF WRITER represents the experienced team at HEREMilwaukee.com, your go-to source for actionable local news and information in Milwaukee, Milwaukee County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Summerfest, Milwaukee Film Festival, and the Milwaukee Boat Show. Our coverage extends to key organizations like the Metropolitan Milwaukee Association of Commerce and Visit Milwaukee, plus leading businesses in manufacturing and brewing that power the local economy such as Harley-Davidson and MillerCoors. As part of the broader HERE network, we provide comprehensive, credible insights into Wisconsin's dynamic landscape.
