The construction industry continued to navigate turbulence throughout the first quarter of 2026. Industrywide employment oscillated, growing rapidly in January, falling in February, and bouncing back nicely in March. The industry added 58,000 net jobs over that three-month period, an impressive rebound from what turned out to be a dismal 2025; the industry lost jobs last year, the first annual decline since 2020.
Choppy construction employment growth has been accompanied by bizarre workforce dynamics. The industrywide pace of hiring fell to the lowest level ever recorded in February, while both quits and layoffs also remained uncommonly low. Which is to say, there is exceptionally little workforce churn at the moment.
There is exceptionally little workforce churn at the moment.
This lack of hiring is at least partially a reflection of stagnant levels of construction activity. Overall construction spending is up just 1.0% over the past year, and nonresidential spending is actually down slightly. This is entirely due to plunging private sector activity, with private nonresidential spending down 3.0% over the past twelve months.
Much of this decline can be attributed to the manufacturing segment. Spending in the category has fallen sharply—down 15% over the past year—a trend that will persist as CHIPS Act incentivized megaprojects continue to wind down.
The boom in data center construction activity has offset some of that weakness, though it should be noted the category is still relatively modest in size. Even with recent trends, manufacturing construction spending is still about 4 times higher than data center construction spending.
Outside of data centers, power-related projects, and a few public categories, momentum is scarce. Private construction activity is down year over year in many of the other largest segments, including the commercial and healthcare categories.
Outside of data centers, power-related projects, and a few public categories, momentum is scarce.
Some of the headwinds that caused this disappointing performance will intensify in the coming months. Material prices rose sharply in March, and that’s directly attributable to the conflict in Iran and resulting surge in oil prices. As those effects filter into other inputs, construction materials price escalation will almost certainly continue to accelerate. At the same time, that conflict has put upward pressure on treasury yields, and that has resulted in higher borrowing costs and tighter lending standards.
Contractors don’t seem particularly bothered. ABC’s Construction Backlog Indicator rebounded in March, while the Construction Confidence Index shows ongoing optimism about sales, profit margins, and hiring.
In Western Michigan, construction employment growth has ground to the slowest pace since early 2021; over the past 12 months, the industry has added just 100 jobs. Of course, this is outperformance relative to Western Michigan’s broader economy, which has lost 2,000 jobs over the past year.
While construction employment has been equally stagnant across the region, broader job losses have been concentrated in the Grand Rapids and Kalamazoo areas. The Muskegon and Niles areas have actually added jobs—both in construction and across all industries—on a year-over-year basis.
Looking ahead, the regional construction market is most vulnerable to the same nationwide macroeconomic factors affecting most contractors. Rising input prices, persistently high borrowing costs, and elevated policy uncertainty will put downward pressure on construction activity in the months to come
Anirban Basu, ABC’s Chief Economist
Anirban Basu is the Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm based in Baltimore, MD, with an office in Orlando, FL. The firm provides strategic analytical services to various sectors, including energy suppliers, law firms, medical systems, government agencies, and real estate developers.
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