As 2025 wraps up, the construction industry continues to wrestle with high costs, labor shortages and policy uncertainty, which have slowed activity across both residential and commercial sectors. While data centers remained a bright spot, most building segments stalled due to elevated interest rates and tariff pressures. Labor conditions also tightened, with retirements and limited immigration keeping the supply of skilled workers low and wages high. Input costs stayed relatively stable in 2025, but trade uncertainty could push them higher in 2026.
Despite these challenges, the outlook for 2026 carries cautious optimism. Potential interest-rate relief, federal tax incentives and remaining Infrastructure Act funding could help revive construction activity in the second half of the year, particularly in nonresidential and specialty trade sectors. However, the expiration of major federal programs and the possibility of reduced government spending still pose risks, especially for infrastructure-focused firms. Overall, companies will need to navigate continued cost and labor pressures while preparing to take advantage of emerging growth opportunities as economic conditions improve.
