{"id":34463,"date":"2026-02-04T10:21:26","date_gmt":"2026-02-04T15:21:26","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=34463"},"modified":"2026-02-04T10:28:45","modified_gmt":"2026-02-04T15:28:45","slug":"2026-construction-industry-outlook","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/2026-construction-industry-outlook\/","title":{"rendered":"2026 Construction hiring and business outlook"},"content":{"rendered":"
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Each year, Sage partners with The Associated General Contractors of America (AGC) to survey contractors across the country on a variety of topics including market conditions, operational challenges, workforce dynamics, and technology adoption. The findings of the 2026 Construction Hiring and Business Outlook<\/a> reveal that while certain market segments are experiencing unprecedented growth driven by technological advancement, the overall sentiment among contractors is more cautious than it was last year. <\/p>\n\n\n\n

AI Infrastructure Drives Strongest Growth<\/strong> <\/p>\n\n\n\n

The market segment with the most anticipated growth is data center construction, with a net reading of 57 percent. This segment jumped 15 percentage points from last year and was the only segment with double-digit growth. This is not surprising as the AI boom is creating massive demand for the computing infrastructure needed to power this technology.  <\/p>\n\n\n\n

Power facilities have a solid outlook, with a 34 percent positive net reading. These were the only two categories that improved from last year, which shows how closely tied infrastructure development is to the tech revolution reshaping our economy. <\/p>\n\n\n\n

Growth Slower in Other Markets <\/strong> <\/p>\n\n\n\n

Contractors are more cautious about most other types of work. Five market segments now have negative expectations, compared to just two last year. Retail construction, private office buildings, and hotels are facing the toughest outlook. <\/p>\n\n\n\n

Even the segments that are expected to grow experienced a decline in confidence from a year ago. Healthcare, manufacturing, and water and sewer projects have positive net readings, but all are lower compared to 2025projections. <\/p>\n\n\n\n

Even though confidence in many segments has declined, firms are still reporting that they have plenty of work. Nearly 40 percent of contractors surveyed report that their backlog is bigger than it was a year ago, and 63 percent are planning to add workers in 2026. So, while the overall outlook is mixed, many contractors are staying busy and planning for growth. <\/p>\n\n\n\n

Economic Uncertainty Tops the List of Concerns<\/strong> <\/p>\n\n\n\n

When asked about concerns for the year ahead, contractors identified economic uncertainty as their top challenge, selected by 62 percent of those surveyed. This encompasses multiple factors, including worries about a possible recession, financing getting harder to come by, and unpredictable trade policies. <\/p>\n\n\n\n

These concerns are impacting projects. More than 60 percent of firms said a project owner postponed, scaled back, or canceled a project in the past six months. The reasons vary with 37 percent citing funding uncertainty, 34 percent selecting that financing was either unavailable or too expensive, and 23 percent pointing to rising materials or labor costs. <\/p>\n\n\n\n

Tariff policies are compounding these challenges. About 70 percent of firms say they’ve been affected by tariffs this year. Contractors have found ways to weather the unpredictability. Forty percent have responded by raising their bid prices, while 20 percent have added price adjustment clauses or other protective terms to their contracts. <\/p>\n\n\n\n

Skilled Labor Shortage Continues<\/strong> <\/p>\n\n\n\n

The skilled worker shortage remains a top challenge for the industry. More than 80 percent of firms say it’s hard to find qualified workers, whether that’s hourly craft positions or salaried employees. Additionally, 57 percent of respondents identified insufficient worker supply as a major challenge, while 56 percent noted rising labor costs. <\/p>\n\n\n\n

Immigration enforcement is creating additional challenges for contractors. One-third of firms report being affected by enforcement actions in the past six months, with 24 percent saying their subcontractors have lost workers because of it. <\/p>\n\n\n\n

Accelerating AI Investment<\/strong> <\/p>\n\n\n\n

As we\u2019ve seen across most industries, contractors are reporting an increase in AI adoption. Sixty-one percent of firms now report either currently using AI or planning to increase AI investments this year. That\u2019s a big jump from just 44 percent in last year\u2019s survey. This increase signals that the industry is viewing AI as a strategic necessity rather than an experimental technology. <\/p>\n\n\n\n

Contractors are utilizing AI in a variety of ways. Forty-five percent of firms deploy AI for office and administrative functions, 23 percent utilize it for estimating work, and 20 percent apply it to design or preconstruction activities. Another 16 percent are leveraging AI for recruiting, training, or other human resources functions. <\/p>\n\n\n\n

This increase makes sense given the challenges contractors are facing. When you’re dealing with worker shortages, rising costs, and economic uncertainty, tools that can improve efficiency and accuracy become invaluable. AI is helping firms do more with the resources they do have. <\/p>\n\n\n\n

Positioning for the Future<\/strong> <\/p>\n\n\n\n

As we move forward, the demand for AI-related infrastructure projects creates significant opportunities, but capturing these opportunities requires contractors to operate more efficiently than ever before. Contractors must view technology as a strategic imperative to address workforce constraints and improve how they operate. <\/p>\n\n\n\n

Adoption of cloud-based solutions will continue to accelerate, laying a solid foundation for firms to implement the latest technological advancements in AI. This innovation will help the industry tackle some of its toughest challenges. Construction businesses that leverage technology to weather today’s uncertainties and invest in future capabilities will be the ones positioned to thrive. <\/p>\n\n\n\n

View the full survey findings here<\/a>. <\/p>\n\n\n

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