The construction industry will need to attract an estimated 439,000 net new workers in 2025 to meet anticipated demand for construction services, according to a proprietary model developed by Associated Builders and Contractors. In 2026, the industry will need to bring in 499,000 new workers as spending ramps up in response to expected lower interest rates.
ABC’s proprietary model uses the historical relationship between inflation-adjusted construction spending growth—sourced from the U.S. Census Bureau’s Construction Put in Place Survey—and payroll construction employment—sourced from the U.S. Bureau of Labor Statistics—to convert anticipated increases in construction outlays into demand for construction workers at a rate of about 3,550 jobs per billion dollars of additional spending. The model also incorporates the current level of job openings, unemployment and projected industry retirements and exits into its calculations.
“While the construction workforce has become younger and more plentiful in recent years, the industry still must attract 439,000 new workers in 2025 to balance demand and supply,” said ABC Chief Economist Anirban Basu. “If it fails to do so, industrywide labor cost escalation will accelerate, exacerbating already high construction costs and reducing the volume of work that is financially feasible. Average hourly earnings throughout the industry are up 4.4% over the past 12 months, significantly outpacing earnings growth across all industries.
“This represents improved labor availability relative to recent years,” Basu continued. “The improvement can be traced to two primary factors. First, construction spending is expected to grow at its slowest pace in years throughout 2025, especially in interest rate-sensitive segments like homebuilding. Interest rates will remain elevated in 2025 before likely beginning to dip next year. Second, the industrywide workforce has become significantly younger over the past several quarters, with the median construction worker now younger than 42 for the first time since 2011. As a result, the pace of retirements is expected to slow this year.”
Basu said even with that improvement, contractors will continue to struggle to fill open positions.
“This will be especially true in areas where manufacturing and data center megaprojects are underway,” Basu said. “More than $1 in every $5 spent on nonresidential construction currently goes toward manufacturing projects, and those projects are absorbing a significant share of the labor force in their respective regions.”
Basu said certain factors could render the model as overly conservative, and worker shortages this year could be more severe than expected.
“While the consensus forecast has construction spending increasing by less than 3% in 2025, that same forecast has underestimated growth by a significant margin during each of the past three years,” Basu said. “If inflation dissipates in coming months, borrowing costs will subside and construction volumes will increase. Faster-than-expected immigration over the past few years has also bolstered labor supply, and potential changes to immigration policy will likely constrain worker availability.”
