The longest shutdown of the U.S. government, spanning 43 days from October 1st to November 12th—has ended, yet it will take several more weeks before public data releases resume. For the construction industry, this period of reduced data visibility couldn’t have come at a worse time. The most recent construction spending data, which pertains to July 2025, shows that nonresidential construction activity has been in steady decline, falling about 4% over the past two years.
This weakness has been especially apparent in the private sector; spending is down on a year-over-year basis in 8 of the 11 private nonresidential subsegments. The only segments with any kind of momentum are data centers and power, the latter of which is being driven higher by the former.
While public sector spending has held up somewhat better, rising 3.1% over the past year, virtually all of that increase occurred prior to October 2024. Finances will be increasingly strained for many state and local governments over the next few years, clouding the outlook for public sector construction.
And then there’s material prices, which have started to rise meaningfully in recent months, ending a roughly two-year streak of little-to-no increase. Tariffs are the primary cause of these increases, and while the effects of tariffs on imported materials prices are obvious, higher import taxes also put upward pressure on domestically produced inputs. This was glaringly apparent in the most recent producer price index data (pertaining to August), which indicates sharp increases in domestic prices for many key inputs including copper and steel products.
Most concerning of all, the construction industry had lost jobs in three consecutive months as of August 2025, and total industry employment is up by just 6,000 positions in 2025. Despite weak demand for construction labor, staffing shortages appear to be re-emerging as immigration policy weighs on the industry’s workforce—the industrywide unemployment rate fell to 3.2% in August, matching the lowest level ever recorded.
Even with this dismal collection of data and the uncertainty brought about by the government shutdown, contractors remain relatively optimistic about the outlook. Contractors expect their profit margins to improve and their staffing levels and sales to increase over the next six months, according to ABC’s Construction Confidence Index. Despite declining slightly in October, contractor backlog is unchanged from one year ago.
Even with this dismal collection of data and the uncertainty brought about by the government shutdown, contractors remain relatively optimistic about the outlook.
In Western Michigan, construction employment growth has slowed, with industrywide employment up just 1.6% on a year-over-year basis. While that’s the second slowest annual job growth of any month over the past 2.5 years, it’s significantly faster than economy-wide employment growth in the region. Total employment in Western Michigan is up by just 0.1% over the past year, or roughly 900 jobs.
The upshot is that it appears Western Michigan’s construction industry was performing relatively well as of August, but there’s a dearth of more recent data and ever-rising uncertainty. Given broader weakness across the industry, still-tight lending standards, and once again rising materials prices, activity may slow over the next few quarters.
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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