The U.S. commercial construction sector is simultaneously experiencing unprecedented growth and emerging instability, with 2025 setting an all-time record for employment while early indicators suggest a slowdown may be on the horizon. A new analysis by QBE North America highlights a rare moment in which record industry strength may be masking growing vulnerabilities.
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In May 2025, construction employment reached 8.3 million jobs, the highest level recorded since data collection began in 1939. The rebound since the 2008 financial crisis has been remarkable: the industry didn’t just recover—employment surged past pre-crisis peaks in 2023. Federal spending on infrastructure, corporate demand for data centers and advanced manufacturing sites, and reshoring of industrial activity all contributed to the boom. Workers in the field have also benefited directly, with wages climbing 4.2% from June 2024 to June 2025, outpacing the national average as employers competed fiercely for talent.
Yet QBE warns that recent patterns could signal trouble ahead. For the first time since 2012, construction employment dropped for three straight months between June and August 2025. Commercial construction spending has fallen two years in a row, reverting to levels not seen since before the 2022 surge. These declines align with a broader cooling of the U.S. economy—job creation nationwide has slowed to post-recession levels, while GDP and foreign investment underperformed expectations during the first half of the year.
The industry’s biggest obstacle remains manpower. Even at record employment, demand still far exceeds the available workforce.
The Associated Builders and Contractors (ABC) estimates that the sector must attract 499,000 additional workers in 2026 to meet demand. Meanwhile, a national survey from the Associated General Contractors of America (AGC) and NCCER found that 92% of firms are struggling to fill open roles.
Demographic pressures are tightening the labor pool further. More than one in five construction workers is over age 55, and fewer young Americans are pursuing trade pathways as college enrollment continues its cultural dominance. Meanwhile, immigration policy shifts are accelerating labor scarcity. Foreign-born workers make up 25.5% of the construction workforce, far higher than the national labor rate of 17.7%. This workforce pipeline is being squeezed under stricter immigration enforcement, and shortages could intensify over the next three years.
Material costs are becoming a second major threat to the sector’s stability. Tariff shifts have transformed construction pricing dynamics. According to QBE, the U.S. weighted average tariff rate has jumped to nearly 20% in 2025, a stark increase from 2–3% in January.
Critical construction materials face even larger hikes:
These increases have already pushed nonresidential building input prices up 2.6% year-over-year as of August 2025. Iron and steel costs are up 9.2%, while copper and cable prices have surged 13.8%. With USMCA renegotiations approaching in 2026, trade uncertainty may compound volatility and further deter investment.
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The report also points out that the government programs which powered recent spending are now winding down. The CHIPS and Science Act and the Infrastructure Investment and Jobs Act will be fully allocated by late 2026. Additionally, the administration has frozen tens of billions in Inflation Reduction Act grants and is exploring reduced tax credits and accelerated expiration timelines. This reversal could steadily slow the wave of manufacturing, energy, and infrastructure projects that have driven construction demand since 2022.
Despite headwinds, QBE notes that significant long-term opportunities persist. Renewable energy projects are expected to expand rapidly, nearly tripling generation capacity from 2023 to 2033, and electric vehicle infrastructure will generate ongoing construction demand.
The private sector may offer the most substantial opportunity. AI growth and cloud computing are driving a hyper-competitive push for data center construction. The Electric Power Research Institute projects data center electricity consumption to rise from 4% of U.S. generation in 2024 to up to 9% by 2030, underscoring the scale of infrastructure required. The Bureau of Labor Statistics forecasts 5.9% employment growth in nonresidential building construction — much of it data center–driven.
States are also using incentive packages to attract megaprojects. Texas alone has distributed over $100 million in Enterprise Fund grants, helping secure nearly $25 billion in private investment commitments. Other states like Michigan, Georgia, New York, Ohio, and Arizona are aggressively competing with similar programs to attract manufacturing and industrial campuses.
Private equity is reshaping the market as well, with 800 specialty trade firms acquired between 2022 and 2024, particularly in HVAC, electrical, and plumbing sectors, signaling increased consolidation and capital inflow.
The commercial green building market is projected to nearly double between 2025 and 2030, driven by both regulatory expectations and corporate sustainability strategies. Even in states like Texas, where strict environmental mandates are less common, developers are increasingly building to green standards due to performance savings, consumer preference, and long-term cost stability.
QBE’s analysis concludes that broader geopolitical uncertainty could reinforce U.S. construction as a long-term investment magnet. With China’s economic slowdown, Russian tensions impacting European markets, and fragmented foreign financial systems, global capital is shifting toward the relative stability of the U.S. Dozens of governments — including the EU, UAE, Japan, South Korea, and the UK — have pledged multi-trillion-dollar investments in U.S.-based infrastructure, technology, and manufacturing initiatives.
Originally reported by R&I Editorial Team in Risk and Insurance.
