Despite mounting pressures from labor shortages, tariffs and immigration enforcement, data center construction continues to stand out as a bright spot for the U.S. construction industry in 2026, according to the Associated General Contractors of America’s latest hiring and business outlook.
Sixty-five percent of contractors expect the data center construction market to expand over the next 12 months, while just 8% anticipate a decline, AGC reported in its 2026 survey released Jan. 8. Power generation and utility projects were the only other sector to post stronger optimism than in 2025, reflecting the growing infrastructure demands tied to large-scale data center development.
Outside of those two segments, however, contractor sentiment weakened. Expectations declined for public transportation and infrastructure work, as well as for private-sector warehouse and multifamily construction, highlighting an increasingly uneven construction landscape.
AGC’s survey underscores how persistent workforce challenges are shaping contractors’ outlooks for the year ahead. About 82% of firms said they are struggling to fill hourly craft positions, while 80% reported difficulty hiring salaried employees. As a result, roughly 60% of respondents said at least one project had been postponed or canceled within the past six months due to staffing constraints.
During a webinar discussing the survey results, industry leaders emphasized that labor availability — not demand — is now the defining constraint for many contractors.
The share of firms struggling to fill open positions climbed to its highest level in the past three years, said Ken Simonson, AGC’s chief economist. At the same time, retirements among experienced workers are compounding the problem, according to Kyle Van Slyke, chief operating officer at Musselman & Hall Contractors, based in Overland Park, Kansas.
“Our biggest challenge is this workforce,” said Van Slyke during the call. “The senior leadership that continues to retire and not be replenished is really hurting our market.”
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Labor challenges are being further complicated by immigration enforcement activity. About 33% of contractors said they were affected by enforcement actions over the past six months, either because workers stopped showing up or subcontractors lost access to labor. Another 6% reported instances of Immigration and Customs Enforcement officers appearing at a jobsite or company office.
At the same time, tariffs continue to weigh heavily on construction costs and bidding strategies. Roughly 70% of contractors said tariffs affected their business in 2025, prompting 40% to raise bid prices and about one-third to accelerate materials purchases. While 35% of firms said they passed most or all tariff-related costs on to owners, 11% reported absorbing those costs internally.
Taken together, the challenges illustrate a construction market defined by stark contrasts — booming demand for specialized facilities like data centers and power projects, alongside tightening margins and uncertainty elsewhere.
“2026 offers a handful of clear bright spots amid a growing number of challenges, reflecting the mixed outlook reported throughout the survey,” AGC CEO Jeffrey Shoaf said during the call. “Association officials continue to urge the administration and Congress to address construction workforce shortages in both short term and long term measures.”
As contractors move into 2026, AGC’s outlook suggests that firms positioned in data center and energy-related markets may continue to thrive, while those dependent on labor-intensive or cost-sensitive sectors face a far more difficult path forward.
Originally reported by Sebastian Obando, Reporter in Construction Dive.
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