Listen to this articleContractors are optimistic about certain segments of the private sector and have high hopes for most types of work in the public sector, according to survey results released today by Associated General Contractors of America and Sage. Still, they have very low expectations for several private sector market segments, remain concerned about labor shortages and fear material prices will rise amid the threat of new tariffs, they said A year in limbo: The construction hiring and business outlook in 2025.
“The year 2025 offers some bright spots for the construction industry, although the outlook for some segments of the private sector remains quite bleak,” said Jeffrey Shoaf, chief executive of the association. “Companies expect regulatory relief to help boost demand, and they will continue to hire when they can and boost investment in technologies, particularly artificial intelligence.” Click Here to watch a short video about the results.
Net value – the percentage of respondents who expect the available dollar value of projects to increase compared to the percentage who expect a decrease – is positive for 15 of the 17 construction categories included in the survey. The highest net value, 42 percent, is for data centers.
Contractors are also very optimistic about the prospects for water and wastewater projects with a net value of 35 percent and for energy projects with a net value of 32 percent. They are also optimistic about healthcare construction, with a net share of 27 percent for non-clinical healthcare facilities such as clinics, testing facilities and medical laboratories and 24 percent for hospitals.
With a net value of 25 percent, those surveyed also expressed a predominantly positive opinion about the construction of production facilities. Developers are also optimistic about the education sector, with a net value of 13 percent for schools from kindergarten to grade 12 and 12 percent for higher education construction.
Five other segments have values ranging from moderately positive to negative. The net value for warehouse construction is 14 percent, while the value for multi-family housing construction is 12 percent. The contractors recorded a slightly positive net value of 7 percent in accommodation. Meanwhile, the net value for private office construction is -3 percent. And the outlook for retail projects is -5 percent.
Association officials noted that expectations for contractors are high across a range of infrastructure segments. The net value for transport structures such as airport and railway projects is 29 percent. Expectations for bridge and highway work are net positive by 24 percent. The figure for federal contracts for agencies such as the General Services Administration and the US Army Corps of Engineers is 22 percent. Another public category – public buildings – recorded a moderately positive net value of 14 percent.
“One reason contractors have a relatively positive outlook for many public sector market segments is that more contractors are recognizing the impact of increased federal investment in infrastructure,” said Ken Simonson, the association’s chief economist. He found that 18 percent of respondents said they had worked on new, government-funded infrastructure projects, double the number a year ago when 9 percent said so.
The construction economist noted that most companies expect to hire new workers in 2025 to meet higher demand for most types of projects. More than two thirds of those surveyed expect an increase in the workforce, while only 10 percent expect a decrease.
Still, he warned that more than three in four companies report having difficulty filling hourly (78 percent) or salaried (77 percent) positions. In addition, the majority assume that hiring skilled workers will remain difficult or become more difficult. Only 12 percent say that recruiting is becoming or will remain easier.
Contractors continue to face a significant number of project postponements and cancellations. About two-thirds of respondents say projects have been postponed or canceled. 42 percent of companies report that projects in 2024 were postponed but rescheduled, while 34 percent of respondents report that projects were postponed or canceled and not rescheduled. Sixteen percent have already seen a project planned for the first half of 2025 or later postponed or canceled.
However, Simonson noted that supply chains are coming back online. Almost half of respondents say they will not have any supply chain problems in 2024. Only 23 percent of respondents in 2024 and only 9 percent in 2023 said they had not experienced such problems. To deal with or avoid problems, 41 percent of respondents expedited purchases after finalizing contracts, while 32 percent turned to alternative suppliers and 25 percent specified alternative materials or products.
Among contractors' biggest concerns in 2025, the three most cited relate to labor. 62 percent cited rising direct labor costs as one of their top three concerns, while 59 percent cited an inadequate supply of labor or subcontractors and 56 percent cited labor quality. The only other concern cited by a majority (54 percent) of respondents is the cost of materials. Given supply chain improvements, this concern is likely tied to President-elect Trump's threats to impose a wide range of new tariffs, Simonson noted.
Sage officials noted that construction companies are increasingly leveraging technology to address industry challenges such as labor shortages and productivity needs. With 44 percent of companies, artificial intelligence is the technology with the largest expected increase in investment. Other key areas for increased investment include document management software (40 percent), accounting software (36 percent) and project management software (35 percent).
“AI’s potential to revolutionize construction workflows is driving interest and investment,” said Dustin Stephens, global head of construction at Sage. “Leading construction companies are leveraging advances in AI, cloud and mobile technologies to work more efficiently and tackle complex projects more nimbly.”
Stephens added that while cloud adoption remains stable – 61 percent of companies now use cloud-based project management tools – cybersecurity has emerged as the top IT challenge, cited by 41 percent of respondents, while at the same time for implementing and training new technologies was a distant second, with 38 percent of companies citing it as one of the biggest IT challenges. “As companies embrace innovation, addressing security concerns and streamlining implementation will be critical to sustaining growth in a rapidly evolving industry,” he said.
Association officials said they are urging the new administration to work with Congress to create new temporary work visa programs specifically for the construction industry. They are also calling on President Trump and Congress to pass the Stronger Workforce for America Act, which would increase funding for post-secondary construction training programs and increase funding for high school construction training programs.
They are also calling on President Trump to rescind President Biden's executive order requiring project labor contracts for every federal construction project valued at $35 million or more. They are also urging the president to be frugal in imposing new tariffs and to implement many of the permit-streamlining measures that Congress approved but were largely ignored by President Biden.
“It will be a good year for the construction industry if the Trump administration works with us to find a way to address material shortages, prevent material price inflation, lift restrictions on work on federal projects and streamline the permitting process,” Shoaf said.