WASHINGTON — September 2, 2025 — As 2025 reaches its midpoint, leading U.S. contractors are signaling caution ahead. New market outlooks from Skanska, DPR, and Gilbane underscore how tariffs, policy uncertainty, and tightening labor markets are weighing on construction activity, even as opportunities emerge in infrastructure and water-related work.

A Construction Market in Flux

The three contractors’ reports paint a picture of a construction economy balancing resilience with hesitation. Slower growth, supply chain pressures, and tighter immigration enforcement are creating headwinds that could extend well into 2026.

For Skanska, the dominant issue is confidence. The company described 2025 as a year “where owners are questioning stability due to funding concerns and overall project costs.” With higher input prices and shifting federal policies, owners are reportedly more hesitant to commit to large-scale projects.

DPR Construction flagged another key challenge: the uneven implementation of federal policy. The firm noted a disconnect between the promises of President Donald Trump’s One Big Beautiful Bill and what has materialized in practice through a mix of executive orders. This scattershot policy environment, DPR said, leaves contractors navigating “mixed signals for planning.”

Labor Supply Tightened by Immigration Enforcement

Labor shortages remain one of the most pressing issues. Contractors are already contending with a limited skilled workforce, and recent federal immigration enforcement measures have exacerbated the strain.

DPR acknowledged the potential risk to productivity, even if the immediate impact on its own sites has been limited:

“While we haven’t seen this as a widespread challenge on our sites specifically, there is data from Associated General Contractors of America research aggregating percentages of ‘foreign-born’ trade workers, with over 50% in trades,” according to the DPR report. “If the U.S. government decides to further restrict the legal immigration process then yes, we could definitely assume a potential significant impact on some of these trade roles over time.”

Tariffs and Supply Chains

On the material side, tariffs on copper and steel have emerged as particular pressure points, according to Skanska. The higher costs, combined with supply chain bottlenecks, are forcing contractors to rethink procurement strategies.

Both Skanska and DPR indicated that many firms are engaging in frontloaded buying activity—purchasing materials early to guarantee supply later in the project cycle. At the same time, DPR noted that firms are increasingly adopting artificial intelligence and advanced analytics to forecast material needs and mitigate shortages before they arise.

Slowing Growth Ahead

Gilbane’s outlook added a macroeconomic lens, projecting just 1% overall growth in 2025 construction spending, a sharp slowdown compared to 6.5% in 2024. The drag comes primarily from weak residential markets, though certain nonresidential sectors remain strong.

Gilbane pointed to roads, bridges, water, and waste projects as relatively insulated from the broader slowdown thanks to steady public funding streams. Still, the firm warned that tight credit and economic uncertainty could limit expansion elsewhere in the industry.

Opportunities Amid Uncertainty

Despite the challenges, all three reports underscored that selective opportunities remain. Infrastructure, water supply, and environmental projects are expected to offer steady work, while the adoption of AI-driven supply chain management could help offset volatility in materials.

But the overall message remains one of caution. Policy unpredictability—from tariffs to immigration enforcement—has made planning more complex, forcing contractors to hedge against risks while still chasing growth in public-sector funded markets.

Originally reported by Sebastian Obando in Construction Dive.