The survey conducted by the Associated General Contractors of America (AGC) and Sage polled 951 construction firms in 49 states and the District of Columbia between 4 November and 15 December 2025.
“While there are pockets of optimism in select private-sector markets, contractors’ overall sentiment has dampened notably compared to last year,” said AGC chief executive Jeffrey Shoaf
“One reason for their lowered expectations is that contractors are increasingly worried about the broader economy, the possibility of a recession and the outlook for materials costs.”
The report, Dampened Expectations: The 2026 Construction Hiring and Business Outlook, measures contractors’ expectations for different market segments via a “net reading” – the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink.
Glimmers of hope
The highest net reading, 57%, is for data centers. Specifically, 65% of respondents expect the market for data center construction to increase, compared to just 8% who expect it to shrink. Contractors remain bullish about power projects as well, which recorded a net reading of 34%.
Contractors are moderately optimistic about hospitals, other healthcare facilities, water and sewer, and manufacturing. Within healthcare, non-hospital facilities, including clinics, testing facilities, and medical labs, recorded a net reading of 24%, followed by hospital construction with a net reading of 20%.
Water and sewer had a net reading of 16% and manufacturing posted a net reading of 15%.
And the rest
However, the net reading for construction of transportation structures, such as airport and rail projects, plunged from 29% to 11% during the past year. The reading for bridge and highway construction dropped 14 percentage points to 10%.
Net readings declined as well for warehouse, federal work, multifamily residential projects and public building. Expectations for work from federal agencies such as the General Services Administration, Department of Veterans Affairs, U.S. Army Corps of Engineers, and the Naval Facilities and Engineering Command fell from 22% to 5%, while the multifamily residential net slid from 12% to 4%. The net for public building dropped as well, from 14% to 1%.
The net reading for K-12 construction declined from 13% in 2025 to -1% in this year’s survey. Higher education slipped from a net of 12% to -5%. Expectations for education construction have been weakening for several years, with both K–12 and higher education showing decelerating growth since 2022, aside from a brief uptick in higher education in 2024.
Expectations for lodging, private office, and retail construction were the three most negative segments in 2026. The net reading for lodging fell 14 points, from 7% in 2025 to -7% in this year’s survey. Private office declined by 11 points to -14%, while retail dropped 13 points to -18%.
Policy woes
Many contractors also report being affected by tariffs and tougher immigration enforcement. Roughly 70% of firms report being affected by tariffs this year.
Forty percent report had responded to actual or proposed tariffs by raising bid prices and 20% of firms added price-sharing adjustments or other terms to contracts.
While 35% report passing most or all tariff-related costs on to project owners, 11% say they absorbed most or all tariff costs.
A third of firms (33%) report having been affected by immigration enforcement actions in the past six months. Six percent report a jobsite or offsite was visited by immigration agents. Eleven percent say workers left or failed to appear because of actual or rumored immigration actions, and 24% report subcontractors having lost workers.
Two-thirds fear recession
Nearly two thirds of respondents (63%) report that an owner postponed or canceled a project in the past six months. When asked why, 37% cite a lack of funding or uncertainty about a funding source, whether federal, state, or private.
More than one in three firms (34%) say project financing was unavailable or too expensive. Just under a quarter (23%) of firms say increasing material or labour costs played a role.
Asked to identify their biggest concerns for this year, 62% said economic slowdown or recession. The next three most cited concerns were workforce-related: 57% of respondents said a lack of workers or subcontractors, 56% said rising direct labor costs, and 53% identified worker quality.
Most firms (63%) anticipate adding workers this year for current or planned projects, against only 15% who expect a decrease. But 82% report having trouble filling hourly craft positions and 80% say the same of salaried openings – a higher proportion than at any point in the past three years.
Officials with Sage reported that firms are investing in technology. Sixty-one percent say their firms are using AI or plan to increase investment in it, up from 44% last year. AI is most commonly used for office and administrative functions, estimating and preconstruction activities.
Plea to Congress
Association officials said one of their top priorities this year will be to get Congress to pass a new surface transportation bill before the current one expires in September.
They will also continue to urge the administration and Congress to address workforce shortages through expanded legal, temporary work visa programs for construction and increased investment in workforce development.
And they’re calling for greater clarity and restraint around tariff policy and for practical permitting reforms to reduce delays.
“With supportive infrastructure funding, workforce, trade and permitting policies in place, construction can continue to grow the economy, deliver essential projects and expand access to high-paying career opportunities,” Shoaf said.
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