Construction contractors are entering 2026 with subdued expectations, except in the areas of data centers and power projects, according to a new industry outlook released by the Associated General Contractors of America and Sage. The report, titled “Dampened Expectations: The 2026 Construction Hiring and Business Outlook,” highlights that most contractors have been affected by tariffs and about one-third have experienced impacts from increased immigration enforcement. Despite these challenges, many firms still plan to hire more workers if they can find qualified candidates.
“While there are pockets of optimism in select private-sector markets, contractors’ overall sentiment has dampened notably compared to last year,” said Jeffrey Shoaf, chief executive officer of the association. “One reason for their lowered expectations is that contractors are increasingly worried about the broader economy, the possibility of a recession and the outlook for materials costs.”
The survey measures contractor expectations using net readings—the difference between those expecting market growth versus contraction. Data center construction received the highest net reading at 57 percent, with 65 percent anticipating growth in this segment. Power projects also remain strong with a net reading of 34 percent.
Moderate optimism was noted for hospitals, other healthcare facilities, water and sewer projects, and manufacturing. Non-hospital healthcare facilities had a net reading of 24 percent; hospital construction was at 20 percent; water and sewer at 16 percent; and manufacturing at 15 percent.
Transportation infrastructure showed significant declines over the past year. The net reading for transportation structures such as airports and rail dropped from 29 percent to 11 percent. Bridge and highway construction fell by 14 percentage points to a net reading of 10 percent.
Other sectors like warehouse development, federal work, multifamily residential projects, and public buildings saw positive but declining net readings. Federal agency contracts fell from a net reading of 22 percent to just five percent. Multifamily residential slipped from twelve to four percent, while public building dropped from fourteen to one percent.
Education-related construction continued its downward trend. K-12 construction declined from thirteen percent in 2025 to negative one percent in this year’s survey. Higher education moved from twelve to negative five percent.
Lodging, private office space, and retail were identified as the weakest segments for 2026. Lodging dropped fourteen points to negative seven percent; private office declined eleven points to negative fourteen; retail fell thirteen points to negative eighteen.
Tariffs continue to affect contractors: about seventy percent reported being impacted this year. Forty percent responded by raising bid prices due to tariffs; twenty percent added price-sharing or similar adjustments in contracts. Thirty-five percent passed most or all tariff-related costs onto project owners while eleven percent absorbed them.
Immigration enforcement also played a role: thirty-three percent said they were affected within six months prior to the survey. Six percent reported jobsite visits by immigration agents; eleven reported workers leaving or not appearing due to immigration actions or rumors; twenty-four reported subcontractors losing workers.
Sixty-three percent indicated that project owners postponed or canceled projects recently—thirty-seven cited funding issues or uncertainty as reasons; thirty-four pointed to unavailable or expensive financing; twenty-three mentioned rising material or labor costs.
When asked about their main concerns for 2026, sixty-two percent cited an economic slowdown or recession as their top worry. Workforce issues followed closely: fifty-seven cited insufficient supply of workers or subcontractors; fifty-six pointed out rising direct labor costs; fifty-three mentioned worker quality concerns.
Despite these worries, most firms expect headcount increases in 2026—sixty-three anticipate hiring more staff while only fifteen foresee reductions. However, more than eighty-two percent report difficulty filling hourly craft positions and eighty-percent struggle with salaried openings—the highest rates in three years.
Sage officials noted increased investment in technology among construction firms as they seek solutions for productivity and labor shortages. Sixty-one percent use artificial intelligence (AI) or plan greater investment in it—up from forty-four last year—with AI mainly applied in administrative functions, estimating, and preconstruction activities.
“AI is becoming an increasingly important tool for construction firms facing tighter labor markets and more complex projects,” said Julie Adams, senior vice president of construction and real-estate solutions at Sage. “Firms are using technology to improve efficiency, manage risk, and maintain productivity in a more uncertain environment.”
Association leaders say passing a new surface transportation bill before September’s expiration is a priority this year along with advocating expanded temporary work visa programs for construction jobs and increased workforce development investment. They also call for clearer tariff policies and permitting reforms aimed at reducing delays.
“With supportive infrastructure funding, workforce, trade and permitting policies in place, construction can continue to grow the economy, deliver essential projects and expand access to high-paying career opportunities,” Shoaf said.
The survey ran from November 4 through December 15, 2025 with responses from nine hundred fifty-one firms across forty-nine states plus Washington D.C., representing various sizes by revenue and employment type—including both unionized (about thirty-percent) and open-shop (about sixty-percent) companies.
The Associated General Contractors of America Nevada Chapter supports its members through advocacy efforts focused on regulatory matters via government affairs committees https://www.nevadaagc.org/join.html, professional development initiatives https://www.nevadaagc.org/join.html, promotion of ethical standards https://www.nevadaagc.org/join.html, collaboration with educational institutions on workforce development https://www.nevadaagc.org/join.html, community engagement activities https://www.nevadaagc.org/join.html, safety education programs https://www.nevadaagc.org/join.html, training opportunities https://www.nevadaagc.org/join.html, networking events https://www.nevadaagc.org/join.html, recognition awards such as PINNACLE Awards https://www.nevadaagc.org/join.html and SIR Awards https://www.nevadaagc.org/join.html. It serves general contractors as well as subcontractors throughout Nevada under its nonprofit status since its chartering in nineteen thirty-nine https://www.nevadaagc.org/join.html.
