What We Learned in October: Industry Momentum Continues to Narrow
Demand for data center construction continues to grow at a blistering pace, yet momentum is scarce across the remainder of the industry. At the same time, cost pressures are reemerging, putting pressure on marginal projects.
Nonresidential Spending Growth Powered by Data Centers
Nonresidential construction spending grew for the fifth consecutive month in August, but that’s almost entirely due to the AI buildout. Data center-related construction spending surged another 7.5% for the month and is up more than 70% over the past twelve months. That growth has accelerated in recent months, expanding at a 149% annualized rate since March.
Materials Price Escalation Accelerates
Construction input prices surged 2.2% higher in September. While much of that increase is due to extraordinarily elevated fuel prices, prices for tariff-affected inputs like iron and steel and copper wire and cable continue to rise at a concerningly brisk pace. Industrywide materials prices are now up 11.2% year over year.
Construction Hiring Concentrated Among Data Center-Related Occupations
The construction industry added jobs for a seventh straight month in September, yet this growth is almost entirely due to a surge in demand for nonresidential specialty trade contractors. Occupations tied to the data center buildout, like electricians, are in particularly high demand and increasingly short supply. Notably, this industrywide employment growth has occurred despite a year-over-year decline in residential employment.
Backlog, and Cost Pressures, Continue to Grow
ABC’s Construction Backlog Indicator rose to 8.7 months in September and is up 0.2 months on both a monthly and yearly basis. That growth is, unsurprisingly, largely due to data centers. ABC contractors with data center work have a backlog (11.3 months) exactly three months longer than those who do not (8.3 months).
While backlog is growing, contractors report growing cost pressures; more than one in four contractors expect their profit margins to contract over the next six months, according to ABC’s Construction Confidence Index.
Looking Ahead
The ongoing data center buildout should keep aggregate demand for nonresidential construction services elevated, but accelerating material and borrowing cost escalation will continue to weigh on contractor margins while reducing the number of projects that pencil out.
| October 2026 Economic Overview | Values | Change from | |||
| Construction Backlog Indicator (Months)* | Sep-26 | Aug-26 | Sep-25 | Aug-26 | Sep-25 |
| Nationwide | 8.7 | 8.5 | 8.5 | 0.2 | 0.2 |
| Middle states | 6.7 | 7.8 | 8.6 | -1.1 | -1.9 |
| Northeast | 8.5 | 7.8 | 7.6 | 0.7 | 0.9 |
| South | 10.3 | 9.8 | 9.9 | 0.5 | 0.4 |
| West | 8.1 | 8.3 | 7.5 | -0.2 | 0.6 |
| Construction Confidence Index** | Sep-26 | Aug-26 | Sep-25 | Aug-26 | Sep-25 |
| Sales | 60.1 | 62.0 | 59.6 | -1.9 | 0.5 |
| Profit margins | 52.0 | 52.9 | 52.3 | -0.9 | -0.3 |
| Staffing | 60.7 | 59.5 | 60.3 | 1.2 | 0.4 |
| Spending ($Millions) | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| Total construction | $2,203,129 | $2,184,474 | $2,242,024 | 0.9% | -1.7% |
| Residential | $894,597 | $884,995 | $940,035 | 1.1% | -4.8% |
| Nonresidential | $1,308,532 | $1,299,479 | $1,301,989 | 0.7% | 0.5% |
| Amusement and recreation | $49,435 | $49,491 | $47,766 | -0.1% | 3.5% |
| Commercial | $122,810 | $123,001 | $129,870 | -0.2% | -5.4% |
| Communication | $29,617 | $29,568 | $28,678 | 0.2% | 3.3% |
| Conservation and development | $16,685 | $16,688 | $12,873 | 0.0% | 29.6% |
| Educational | $137,469 | $137,537 | $138,186 | 0.0% | -0.5% |
| Health care | $75,787 | $75,504 | $78,100 | 0.4% | -3.0% |
| Highway and street | $152,213 | $151,846 | $145,561 | 0.2% | 4.6% |
| Lodging | $24,862 | $24,949 | $27,629 | -0.3% | -10.0% |
| Manufacturing | $170,701 | $170,339 | $211,142 | 0.2% | -19.2% |
| Office | $150,669 | $145,057 | $120,941 | 3.9% | 24.6% |
| Power | $185,973 | $184,409 | $171,380 | 0.8% | 8.5% |
| Public safety | $21,648 | $21,247 | $23,302 | 1.9% | -7.1% |
| Religious | $6,853 | $6,668 | $5,791 | 2.8% | 18.3% |
| Sewage and waste disposal | $53,791 | $53,677 | $53,417 | 0.2% | 0.7% |
| Transportation | $73,215 | $73,028 | $71,039 | 0.3% | 3.1% |
| Water supply | $36,804 | $36,471 | $36,314 | 0.9% | 1.3% |
| Private nonresidential | $773,010 | $764,979 | $780,447 | 1.0% | -1.0% |
| Public nonresidential | $535,522 | $534,499 | $521,542 | 0.2% | 2.7% |
| Employment (Thousands) | Sep-26 | Aug-26 | Sep-25 | Aug-26 | Sep-25 |
| All industries | 159,044 | 159,015 | 158,548 | 0.0% | 0.3% |
| Construction | 8,364 | 8,353 | 8,255 | 0.1% | 1.3% |
| Residential building | 923 | 920 | 927 | 0.3% | -0.4% |
| Nonresidential building | 951 | 950 | 920 | 0.1% | 3.4% |
| Heavy and civil engineering construction | 1,211 | 1,208 | 1,185 | 0.2% | 2.2% |
| Residential specialty trade contractors | 2,340 | 2,348 | 2,369 | -0.3% | -1.2% |
| Nonresidential specialty trade contractors | 2,940 | 2,927 | 2,855 | 0.4% | 3.0% |
| Construction unemployment rate | 3.5% | 3.1% | 3.8% | 0.4pp | -0.3pp |
| Average hourly construction earnings | $41.69 | $41.64 | $40.01 | 0.1% | 4.2% |
| Average weekly construction hours | 39.2 | 39.4 | 39.0 | -0.5% | 0.5% |
| Job Openings and Labor Turnover Survey (Construction) | Aug-26 | Jul-26 | Aug-25 | Jul-26 | Aug-25 |
| Job openings | 251,000 | 299,000 | 213,000 | -48,000 | 38,000 |
| Hires | 308,000 | 358,000 | 336,000 | -50,000 | -28,000 |
| Total separations | 272,000 | 315,000 | 351,000 | -43,000 | -79,000 |
| Layoffs and discharges | 99,000 | 157,000 | 182,000 | -58,000 | -83,000 |
| Quits | 152,000 | 149,000 | 150,000 | 3,000 | 2,000 |
| Other separations | 21,000 | 10,000 | 18,000 | 11,000 | 3,000 |
| Producer Price Index: Inputs to | Sep-26 | Aug-26 | Sep-25 | Aug-26 | Sep-25 |
| Construction | 365.4 | 357.5 | 328.5 | 2.2% | 11.2% |
| Multifamily | 171.4 | 168.4 | 157.1 | 1.8% | 9.1% |
| Nonresidential | 184.9 | 180.7 | 166.3 | 2.3% | 11.2% |
| Commercial | 172.3 | 169.5 | 158.0 | 1.7% | 9.1% |
| Healthcare | 172.5 | 168.9 | 157.4 | 2.1% | 9.6% |
| Industrial | 181.6 | 177.9 | 164.8 | 2.1% | 10.2% |
| Other nonresidential | 184.5 | 179.6 | 164.4 | 2.7% | 12.2% |
| Maintenance and repair | 374.1 | 365.3 | 333.6 | 2.4% | 12.1% |
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.
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