What We Learned in July: Both Industry’s Limited Momentum and Headwinds Remain Firmly in Place
Construction spending continues to contract, and momentum is particularly scarce outside of the data center segment. Headwinds like materials price escalation and high borrowing costs remain stiff, yet backlog and consumer confidence are both healthy heading into the second half of 2026.
Private Nonresidential Construction Spending Continues to Slide
Construction spending in the private nonresidential segment shrank for the seventh straight month in May and is down nearly 7% over the past year. Much of that weakness is due to waning CHIPS Act incentivized megaprojects, yet there is an utter lack of momentum outside of the surging data center segment. Public nonresidential activity has held up better and rose at a healthy pace in May.
Construction Employment Grew in June
Construction industry employment added 11,000 jobs in June, all of which were in the nonresidential segment. Employment in the residential segment contracted. This growth, fueled by data centers and public construction, will likely persist over the coming months as activity in those segments continues to expand.
The industry’s unemployment rate is up 1.3 percentage points over the last year, indicating that worker availability has improved across certain occupations.
Contractor Backlog and Confidence Stable
ABC’s Construction Backlog Indicator fell to 8.8 months in June but is still above year-ago levels. That annual growth has been fueled entirely by the Middle States and South regions; backlog is down over the past 12 months in the Northeast and West. Contractor confidence, meanwhile, remains elevated, with contractors on net expecting greater sales, hiring and profit margins over the next six months.
Materials Prices Fall With Oil Prices
Construction input prices fell in June, largely due to the decline in oil prices, but remain nearly 8% higher than during the same month last year. Despite the decline, input price escalation will likely resume in the coming months due to renewed oil price pressures and ongoing increases in the price of tariff-affected inputs like iron, steel and copper.
Looking Ahead
Surging data center activity is crowding out other forms of commercial investment. That, along with elevated materials and borrowing costs, has led to a dearth of momentum across most private nonresidential construction segments. That dynamic will remain firmly in place over the coming months, especially with oil prices once again rising and borrowing costs unlikely to decline in the near future.
| July 2026 Economic Overview | Values | Change from | |||
| Construction Backlog Indicator (Months)* | Jun-26 | May-26 | Jun-25 | May-26 | Jun-25 |
| Nationwide | 8.8 | 9.1 | 8.7 | -0.3 | 0.1 |
| Middle states | 8.5 | 8.2 | 7.3 | 0.3 | 1.2 |
| Northeast | 8.0 | 9.0 | 9.2 | -1.0 | -1.2 |
| South | 10.3 | 10.3 | 9.4 | 0.0 | 0.9 |
| West | 7.6 | 7.6 | 8.0 | 0.0 | -0.4 |
| Construction Confidence Index** | Jun-26 | May-26 | Jun-25 | May-26 | Jun-25 |
| Sales | 63.6 | 61.1 | 62.8 | 2.5 | 0.8 |
| Profit margins | 52.4 | 52.5 | 53.5 | -0.1 | -1.1 |
| Staffing | 62.7 | 61.3 | 59.4 | 1.4 | 3.3 |
| Spending ($Millions) | May-26 | Apr-26 | May-25 | Apr-26 | May-25 |
| Total construction | $2,210,214 | $2,207,051 | $2,244,426 | 0.1% | -1.5% |
| Residential | $942,779 | $939,342 | $926,417 | 0.4% | 1.8% |
| Nonresidential | $1,267,435 | $1,267,708 | $1,318,010 | 0.0% | -3.8% |
| Amusement and recreation | $48,817 | $48,384 | $47,559 | 0.9% | 2.6% |
| Commercial | $122,857 | $123,231 | $130,731 | -0.3% | -6.0% |
| Communication | $29,237 | $29,036 | $28,464 | 0.7% | 2.7% |
| Conservation and development | $14,967 | $14,765 | $12,803 | 1.4% | 16.9% |
| Educational | $138,467 | $137,988 | $142,529 | 0.3% | -2.8% |
| Health care | $74,545 | $74,323 | $77,235 | 0.3% | -3.5% |
| Highway and street | $151,701 | $150,860 | $147,267 | 0.6% | 3.0% |
| Lodging | $24,305 | $24,360 | $27,231 | -0.2% | -10.7% |
| Manufacturing | $174,764 | $177,206 | $223,805 | -1.4% | -21.9% |
| Office | $124,428 | $124,170 | $120,054 | 0.2% | 3.6% |
| Power | $174,714 | $175,115 | $172,584 | -0.2% | 1.2% |
| Public safety | $21,447 | $21,409 | $22,900 | 0.2% | -6.3% |
| Religious | $6,389 | $6,286 | $5,057 | 1.6% | 26.3% |
| Sewage and waste disposal | $53,235 | $53,067 | $53,263 | 0.3% | -0.1% |
| Transportation | $71,893 | $71,774 | $70,917 | 0.2% | 1.4% |
| Water supply | $35,670 | $35,733 | $35,612 | -0.2% | 0.2% |
| Private nonresidential | $738,734 | $741,325 | $790,988 | -0.3% | -6.6% |
| Public nonresidential | $528,701 | $526,383 | $527,022 | 0.4% | 0.3% |
| Employment (Thousands) | Jun-26 | May-26 | Jun-25 | May-26 | Jun-25 |
| All industries | 158,984 | 158,927 | 158,478 | 0.0% | 0.3% |
| Construction | 8,331 | 8,320 | 8,267 | 0.1% | 0.8% |
| Residential building | 916 | 919 | 931 | -0.3% | -1.5% |
| Nonresidential building | 948 | 945 | 927 | 0.3% | 2.3% |
| Heavy and civil engineering construction | 1,206 | 1,203 | 1,177 | 0.2% | 2.4% |
| Residential specialty trade contractors | 2,350 | 2,355 | 2,384 | -0.2% | -1.4% |
| Nonresidential specialty trade contractors | 2,912 | 2,898 | 2,848 | 0.5% | 2.2% |
| Construction unemployment rate | 4.7% | 4.1% | 3.4% | 0.6pp | 1.3pp |
| Average hourly construction earnings | 41.4 | 41.2 | 39.6 | 0.4% | 4.3% |
| Average weekly construction hours | 39.3 | 39.3 | 38.9 | 0.0% | 1.0% |
| Job Openings and Labor Turnover Survey (Construction) | May-26 | Apr-26 | May-25 | Apr-26 | May-25 |
| Job openings | 298,000 | 266,000 | 222,000 | 32,000 | 76,000 |
| Hires | 295,000 | 319,000 | 345,000 | -24,000 | -50,000 |
| Total separations | 305,000 | 287,000 | 354,000 | 18,000 | -49,000 |
| Layoffs and discharges | 174,000 | 127,000 | 183,000 | 47,000 | -9,000 |
| Quits | 111,000 | 139,000 | 154,000 | -28,000 | -43,000 |
| Other separations | 20,000 | 21,000 | 16,000 | -1,000 | 4,000 |
| Producer Price Index: Inputs to | Jun-26 | May-26 | Jun-25 | May-26 | Jun-25 |
| Construction | 351.7 | 355.6 | 326.7 | -1.1% | 7.6% |
| Multifamily | 165.9 | 167.3 | 156.3 | -0.8% | 6.2% |
| Nonresidential | 177.5 | 179.6 | 165.3 | -1.1% | 7.4% |
| Commercial | 166.9 | 167.9 | 156.8 | -0.6% | 6.4% |
| Healthcare | 166.1 | 167.5 | 156.1 | -0.8% | 6.4% |
| Industrial | 175.3 | 177.2 | 163.4 | -1.0% | 7.3% |
| Other nonresidential | 176.1 | 178.7 | 163.6 | -1.4% | 7.7% |
| Maintenance and repair | 358.8 | 363.8 | 332.0 | -1.4% | 8.1% |
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.
SEE ALSO: CONSTRUCTION BACKLOG INDICATOR SLIPS, CONTRACTORS REMAIN CONFIDENT IN JUNE
