What We Learned in September: Industry Momentum Remains Narrow
The construction industry has one major tailwind right now—gale-force data center construction activity—and a barrage of stiff headwinds including rising materials prices, reemerging labor shortages and steep borrowing costs.
Nonresidential Spending Growth Concentrated in Data Center Segment
Nonresidential construction spending increased in July, entirely due to ongoing growth in the data center segment. Excluding data centers, nonresidential spending fell for the second straight month, down to the lowest level in nearly three years. The only other major category exhibiting growth at the moment is power, and those electricity-generating projects are largely related to the data center buildout.
Materials Prices Continue to Climb
Construction input prices jumped another 1.2% in August and are now up 8.9% over the past 12 months. While high oil prices have made a significant contribution to that escalation, increases are widespread; prices for iron and steel, softwood lumber, switchgear, copper wire and cable, and several derivative metal products are all up more than 10% on a year-over-year basis. Given record high diesel prices, input price escalation will likely continue over the next few months.
Nonresidential Specialty Trade Contractors Lead Hiring Surge
The construction industry added jobs for a sixth straight month in August, and year-over-year growth is up to the fastest pace in 18 months. This growth has occurred despite ongoing weakness on the residential side of the industry and is a byproduct of the ongoing boom in data center construction and its insatiable need for electricians and other specialty trades.
This hiring, as well as the effects of immigration policy, have led to reemerging labor shortages. Industrywide job openings have risen in recent months and are now near a two-year high.
Backlog Rebounds
ABC’s Construction Backlog Indicator rebounded to 8.5 months in August, up 0.5 months from July and unchanged from one year earlier. Contractors remained confident about the outlook in August, according to the Construction Confidence Index, although there was a notable uptick in unprompted mentions of labor shortages in the survey responses.
Looking Ahead
The Federal Reserve hiked interest rates for the first time since 2023 at its September meeting, and the most recent Federal Reserve projections show one more expected rate increase in 2026. With borrowing costs set to rise, the labor market tightening and materials prices increasing, contractor margins may compress over the next several months.
| September 2026 Economic Overview | Values | Change from | |||
| Construction Backlog Indicator (Months)* | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| Nationwide | 8.5 | 8.0 | 8.5 | 0.5 | 0.0 |
| Middle states | 7.8 | 7.1 | 8.3 | 0.7 | -0.5 |
| Northeast | 7.8 | 7.3 | 8.0 | 0.5 | -0.2 |
| South | 9.8 | 10.1 | 10.0 | -0.3 | -0.2 |
| West | 8.3 | 6.9 | 6.6 | 1.4 | 1.7 |
| Construction Confidence Index** | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| Sales | 62.0 | 61.2 | 60.4 | 0.8 | 1.6 |
| Profit margins | 52.9 | 52.7 | 51.9 | 0.2 | 1.0 |
| Staffing | 59.5 | 62.3 | 59.9 | -2.8 | -0.4 |
| Spending ($Millions) | Jul-26 | Jun-26 | Jul-25 | Jun-26 | Jul-25 |
| Total construction | $2,157,581 | $2,167,698 | $2,242,633 | -0.5% | -3.8% |
| Residential | $871,205 | $882,821 | $939,959 | -1.3% | -7.3% |
| Nonresidential | $1,286,376 | $1,284,877 | $1,302,674 | 0.1% | -1.3% |
| Amusement and recreation | $49,204 | $49,353 | $47,807 | -0.3% | 2.9% |
| Commercial | $122,510 | $122,533 | $128,817 | 0.0% | -4.9% |
| Communication | $29,569 | $29,452 | $28,790 | 0.4% | 2.7% |
| Conservation and development | $16,583 | $16,816 | $12,949 | -1.4% | 28.1% |
| Educational | $136,649 | $137,147 | $137,487 | -0.4% | -0.6% |
| Health care | $74,599 | $74,953 | $76,420 | -0.5% | -2.4% |
| Highway and street | $151,508 | $151,792 | $145,020 | -0.2% | 4.5% |
| Lodging | $24,668 | $24,672 | $27,286 | 0.0% | -9.6% |
| Manufacturing | $169,795 | $171,476 | $215,594 | -1.0% | -21.2% |
| Office | $140,064 | $136,111 | $119,854 | 2.9% | 16.9% |
| Power | $181,532 | $180,662 | $172,391 | 0.5% | 5.3% |
| Public safety | $21,292 | $21,262 | $23,267 | 0.1% | -8.5% |
| Religious | $6,631 | $6,697 | $5,562 | -1.0% | 19.2% |
| Sewage and waste disposal | $53,112 | $52,915 | $54,200 | 0.4% | -2.0% |
| Transportation | $72,290 | $72,682 | $70,939 | -0.5% | 1.9% |
| Water supply | $36,370 | $36,356 | $36,292 | 0.0% | 0.2% |
| Private nonresidential | $755,169 | $752,375 | $781,119 | 0.4% | -3.3% |
| Public nonresidential | $531,206 | $532,502 | $521,555 | -0.2% | 1.9% |
| Employment (Thousands) | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| All industries | 159,075 | 158,913 | 158,472 | 0.1% | 0.4% |
| Construction | 8,359 | 8,337 | 8,239 | 0.3% | 1.5% |
| Residential building | 924 | 916 | 923 | 0.8% | 0.1% |
| Nonresidential building | 947 | 949 | 921 | -0.2% | 2.8% |
| Heavy and civil engineering construction | 1,211 | 1,206 | 1,184 | 0.4% | 2.3% |
| Residential specialty trade contractors | 2,349 | 2,346 | 2,370 | 0.1% | -0.9% |
| Nonresidential specialty trade contractors | 2,928 | 2,920 | 2,842 | 0.3% | 3.0% |
| Construction unemployment rate | 3.1% | 3.7% | 3.2% | -0.6pp | -0.1pp |
| Average hourly construction earnings | $41.66 | $41.50 | $39.98 | 0.4% | 4.2% |
| Average weekly construction hours | 39.5 | 39.4 | 38.9 | 0.3% | 1.5% |
| Job Openings and Labor Turnover Survey (Construction) | Jul-26 | Jun-26 | Jul-25 | Jun-26 | Jul-25 |
| Job openings | 326,000 | 298,000 | 305,000 | 28,000 | 21,000 |
| Hires | 366,000 | 319,000 | 333,000 | 47,000 | 33,000 |
| Total separations | 324,000 | 327,000 | 313,000 | -3,000 | 11,000 |
| Layoffs and discharges | 158,000 | 162,000 | 200,000 | -4,000 | -42,000 |
| Quits | 157,000 | 152,000 | 100,000 | 5,000 | 57,000 |
| Other separations | 9,000 | 12,000 | 13,000 | -3,000 | -4,000 |
| Producer Price Index: Inputs to | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| Construction | 357.5 | 353.4 | 328.3 | 1.2% | 8.9% |
| Multifamily | 168.5 | 166.9 | 157.0 | 1.0% | 7.4% |
| Nonresidential | 180.7 | 178.5 | 166.1 | 1.2% | 8.8% |
| Commercial | 169.4 | 167.9 | 157.8 | 0.9% | 7.4% |
| Healthcare | 168.8 | 167.0 | 157.2 | 1.1% | 7.4% |
| Industrial | 177.8 | 175.9 | 164.4 | 1.1% | 8.1% |
| Other nonresidential | 179.6 | 177.1 | 164.1 | 1.4% | 9.4% |
| Maintenance and repair | 365.4 | 360.6 | 333.7 | 1.3% | 9.5% |
Sources: U.S. Bureau of Economic Analysis; U.S. Census Bureau; U.S. Bureau of Labor Statistics, Associated Builders and Contractors.
*The Construction Backlog Indicator measures the average months of work under contract for ABC members.
**The Construction Confidence Index is a diffusion index where values above 50 indicate expectations of expansion over the next six months, while values under 50 indicate expectations of contraction.
