The U.S. construction industry faces a significant labor challenge, needing to attract an estimated 439,000 net new workers in 2025 to meet the anticipated demand for construction services. This number is projected to rise to 499,000 new workers in 2026 as interest rates are expected to drop and spending increases.
According to a model developed by Associated Builders and Contractors (ABC), this need for workers is critical to prevent accelerating labor cost escalation, which would further drive up construction costs and limit the feasibility of projects. Currently, average hourly earnings in construction have risen 4.4% over the past year, significantly outpacing other industries.
Key Factors Influencing the Workforce Need
Anticipated Construction Spending: ABC’s model links increased construction spending to the demand for workers, estimating approximately 3,550 jobs for every billion dollars of additional spending.
Slower Spending Growth in 2025: While the need for workers is high, construction spending is expected to grow at its slowest pace in years during 2025, particularly in interest rate-sensitive areas like homebuilding. This is due to elevated interest rates, which are not anticipated to decline until 2026.
Younger Workforce & Slower Retirements: The industry workforce has become younger, with the median age of a construction worker now under 42 for the first time since 2011. This is expected to slow the pace of retirements, offering some relief.
Megaprojects Creating Localized Shortages: Despite some improvements in labor availability, contractors will still struggle to fill positions, especially in regions with large manufacturing and data center megaprojects. These projects are absorbing a significant portion of the local labor force.
Addressing the Shortage
Michael Bellaman, ABC president and CEO, highlighted that while efforts to hire more workers gained momentum in 2024, there’s still a long way to go to strengthen the talent pipeline. ABC advocates for:
Technology and Innovation in Education and On-Site: Utilizing technology and innovative approaches in training programs and on job sites can maximize workforce productivity and efficiency.
“All-of-the-Above” Workforce Development: ABC supports diverse entry points into the industry and upskilling workers through both industry-driven and government-registered apprenticeship programs.
Merit-Based, Market-Based Visa System: ABC proposes a visa system that allows individuals who want to contribute and work legally in the construction industry to do so.
Favorable Policies and Regulations: Advocating for policies like the Tax Cuts and Jobs Act, the Employee Rights Act, the Fair and Open Competition Act, and permitting reform to create a supportive environment for the construction workforce.
Potential for More Severe Shortages
ABC Chief Economist Anirban Basu cautioned that the model’s predictions could be conservative. If inflation subsides faster than expected, borrowing costs could decrease, leading to an even greater increase in construction volumes and a more severe worker shortage. Additionally, potential changes to immigration policy could further constrain worker availability.