Despite mounting concerns over tariffs and rising construction costs, the U.S. construction sector managed to post modest job gains in May, offering a glimmer of hope in an increasingly uncertain economic environment.

According to the Bureau of Labor Statistics (BLS), the industry added 4,000 new jobs last month, pushing total employment in the sector to 8.3 million workers. This marks the 13th straight month of growth in nonresidential construction employment, a noteworthy achievement given the recent turbulence in trade and monetary policy.

“It’s encouraging to see construction firms continue to add workers, but the rate of hiring has clearly moderated amid market uncertainty,” said Ken Simonson, chief economist for the Associated General Contractors of America (AGC).

“Nonresidential construction firms added employees in May for the 13th month in a row, yet constant changes in tariffs and other policies that are affecting the cost and demand for construction have led to a significant slowdown in hiring,” he added.

Hiring Slows as Pressure Mounts

While construction employment increased by 126,000 positions, or 1.5%, over the past year—outpacing overall U.S. payroll growth of 1.1%—it represents a sharp decline from the 2.8% year-over-year gain seen last May.

Broader labor market data from the BLS showed the economy added 139,000 nonfarm payroll jobs in May, while the unemployment rate remained unchanged at 4.2%, the narrowest it has been since mid-2024.

Economic analysts suggest that tighter borrowing conditions, alongside regulatory uncertainties, are taking a toll on business hiring plans.

“Uncertainty surrounding shifting tariff policies and government spending cuts has left many firms in limbo,” Reuters reported, noting that job growth was mostly concentrated in healthcare and hospitality sectors—while industries like construction, manufacturing, and energy showed signs of cooling.

The Federal Reserve’s Beige Book echoed these sentiments, with most districts reporting flat or slowing activity. Rising import duties and persistent inflationary pressure were flagged as contributing factors to subdued business confidence.

Fed policymakers, still cautious about lingering inflation risks, have signaled reluctance to lower interest rates in the near term.

Tariffs Drive Up Costs, Complicate Planning

Trade policy continues to cast a long shadow over the construction sector. On June 4, the White House doubled Section 232 tariffs on imported steel and aluminum, raising the duties from 25% to 50%. This steep increase builds on the tariffs first introduced in 2018 and is expected to inflate material costs significantly.

Steel alone makes up about 5% of total material costs in nonresidential construction, and these levies could add billions to project budgets through 2025.

Further complicating matters, the administration's “reciprocal tariffs” policy introduced a 10% baseline duty on nearly all imports, plus higher rates for specific categories—20% on Chinese goods and 25% on vehicles.

Meanwhile, longstanding duties on Canadian softwood lumber, totaling roughly 14.5%, remain in effect, with the Commerce Department weighing additional measures following a new inquiry into the lumber market.

Contractors Seek Stability Amid Volatility

The cost volatility has made planning long-term projects increasingly difficult, with contractors facing pressure to maintain margins.

“Construction firms continue to hire and boost wages, but the pace of growth has slowed as demand for certain types of projects cools,” said Jeffrey D. Shoaf, AGC’s chief executive officer. He urged federal officials to provide “more certainty about tariffs, taxes and investment levels” to support continued growth and investment in the sector.

Real-time data from the Commerce Department indicated a 0.4% decline in residential construction spending for April, hinting at early signs of a housing market pullback.

In addition, the Producer Price Index for nonresidential construction inputs rose 1.3% year-over-year, according to AGC. This includes increases in the prices of essential inputs such as gypsum, copper, lumber, and steel, making contractors wary of locking into fixed-price, long-term contracts.

Infrastructure Demand Offers Partial Relief

Despite these headwinds, government-funded infrastructure initiatives remain a bright spot. According to an AGC-Sage industry survey, public infrastructure projects—including upgrades to transportation, utilities, and water systems—accounted for more than 25% of nonresidential construction spending in the first quarter.

Firms remain cautiously optimistic. The survey found that 69% of contractors plan to increase hiring by the end of the year—contingent on improved policy clarity and macroeconomic stability.

The Road Ahead

With the Federal Reserve expected to maintain its current interest rate stance throughout the summer, and trade tensions showing no signs of easing, the construction industry is bracing for a period of prolonged uncertainty.

The modest addition of 4,000 jobs in May may point to resilience, but it also highlights the mounting challenges contractors face—from tightening financial conditions and material inflation to the chilling effects of unpredictable trade and fiscal policy.

Whether the sector can maintain this growth trajectory will depend heavily on Washington’s next moves and the global economic climate in the months ahead.

Originally reported by Bryan Gottlieb in Roofing Contractor.