Labor shortages remain a critical challenge across industries, including construction. For the construction industry, 79% of contractors reported difficulty finding qualified hourly craft workers in the 2025 AGC outlook, and 88% expect this difficulty to persist or worsen in 2025¹. This structural shortage means that even if project demand surges, the industry’s capacity to deliver could be constrained, leading to delays and increased costs.

Construction employment in May 2025 stood at 8.3 million people². While jobs in construction grew by 1.5% over the past year, the pace is slowing². Despite slowing growth and declining job openings over the past three years, layoffs are at record lows, suggesting companies are retaining workers in anticipation of future activity. The low layoff rate indicates a strategic decision by firms to hold onto skilled labor, acknowledging the difficulty of re-hiring in a tight market. This implies that firms are absorbing higher labor costs –average hourly earnings in construction were up 4.2% over the past 12 months, outpacing overall industry earnings growth — and potential underutilization of labor to preserve their capacity for future projects³. This decision is a direct response to the unpredictability of future labor supply and the high cost and difficulty of replacing skilled workers. While labor costs are a significant pressure, firms view maintaining a stable, skilled workforce as a strategic imperative for long-term competitiveness, despite current economic headwinds.

Associated Builders and Contractors (ABC) finds that the industry will be short by almost half a million workers in 2025⁴. This scarcity of skilled labor puts upward pressure on wages. The top concern cited by 62% of firms in AGC’s outlook cited rising direct labor costs, pay, benefits, and employer taxes¹. Tighter immigration enforcement could worsen the ongoing labor shortages, particularly in service-oriented sectors – driving up labor-input costs and reducing demand for new construction in those industries.