Construction contractors are expressing optimism about certain private-sector segments and public-sector work, according to a recent survey by the Associated General Contractors of America and Sage. The survey, titled “A Year in the Balance: The 2025 Construction Hiring and Business Outlook,” reveals mixed expectations across different market segments, alongside concerns over labor shortages and potential increases in materials prices due to new tariff threats.
“2025 offers quite a few bright spots for the construction industry even as the outlook for some private-sector segments remains quite dire,” said Jeffrey Shoaf, CEO of the association. He added that firms anticipate regulatory relief will boost demand and encourage investments in technologies like artificial intelligence.
The survey indicates positive expectations for 15 out of 17 construction categories, with data centers leading at a net reading of 42 percent. Water and sewer projects follow closely with a net reading of 35 percent, while power projects have a net reading of 32 percent. Healthcare construction also shows promise, with non-hospital facilities at 27 percent and hospitals at 24 percent.
Contractors remain optimistic about manufacturing plant construction (25 percent) and education sector projects (13 percent for K-12 schools and 12 percent for higher education). However, other segments like warehouse construction (14 percent), multifamily residential (12 percent), lodging (7 percent), private office (-3 percent), and retail (-5 percent) show varied expectations.
Ken Simonson, chief economist of the association, noted that increased federal infrastructure investments are influencing contractor expectations positively. About 18 percent of respondents reported working on new federally funded infrastructure projects compared to last year’s nine percent.
Despite plans to increase workforce numbers—over two-thirds expect to hire more workers—firms face challenges filling positions. A significant portion reports difficulties hiring hourly craft workers (78 percent) or salaried employees (77 percent).
Project postponements remain an issue, with two-thirds experiencing delays or cancellations. Supply chain improvements were noted by nearly half of respondents in 2024 compared to previous years.
Rising direct labor costs (62 percent), insufficient supply of workers or subcontractors (59 percent), worker quality (56 percent), and materials costs (54 percent) top contractors’ concerns for 2025. These issues may be exacerbated by potential tariffs from President-elect Trump’s administration.
Sage’s Dustin Stephens highlighted increased investment in technology as firms tackle industry challenges. Artificial intelligence leads investment interests at 44 percent, followed by document management software (40 percent), accounting software (36 percent), and project management software (35 percent).
“AI’s potential to revolutionize construction workflows is driving increased interest and investment,” Stephens stated. Cybersecurity emerges as the primary IT challenge facing firms today.
The association urges collaboration between the new administration and Congress on initiatives such as temporary work visas specific to construction, funding boosts for training programs through legislation like the Stronger Workforce for America Act, and reconsideration of existing executive orders impacting federal projects.
“It will be a good year for the construction industry if the Trump administration works with us to find a way to address materials shortages, avoid materials price inflation, remove limits on who can work on federal projects and streamline the permitting process,” Shoaf concluded.
