The construction industry enters 2026 with virtually no momentum. The industry lost 11,000 jobs in December and added just 14,000 jobs across the entirety of 2025. Excluding pandemic-stricken 2020, that represents the worst calendar-year performance since 2011, when the construction industry was still being devastated by the aftermath of the Great Recession.
Weakness is largely concentrated on the residential side of the industry, which lost 41,000 jobs in 2025. Put simply, homebuilding has slowed from the blazing pace seen in 2022 and 2023, and the segment will continue to shed jobs as the number of units under construction falls, at least until mortgage rates decline meaningfully.
Nonresidential construction hiring held up better but still faltered toward the end of the year, with the segment losing nearly 8,000 jobs in December. Nonresidential construction spending generally declined throughout 2025, and momentum is virtually entirely confined to the data center subsegment; construction spending on data centers is up 105% over the past two years, while spending in all other nonresidential subsegments is down 6% over that span.
Despite this anemic job growth, the industrywide unemployment rate is still lower than it was one year ago. That likely reflects immigration policy, which has weighed on the size of the construction workforce. While soft labor demand has prevented that workforce contraction from putting upward pressure on wages, that would change if construction activity rebounds.
Michigan’s statewide construction industry has added 10,400 jobs over the past year, an increase of 5.3%. That blistering pace of growth has not been apparent in Western Michigan, where the industry’s employment base has expanded by a far more modest 1.4% over the past 12 months. That represents the slowest year-over-year percentage growth for the region since April 2023.
While Western Michigan’s construction industry faces many of the same headwinds that are currently buffeting the nationwide industry—high borrowing costs, tight lending standards, extremely elevated policy uncertainty, and reemerging input price escalation—it is also being weighed down by sluggish economic growth. Western Michigan has added jobs at a tepid pace since the start of 2024, and weak job growth tends to have downstream, albeit delayed, effects on construction activity. This recent weakness could also reflect slowing megaproject activity in the region.
While the near-term outlook isn’t particularly upbeat, there is reason to be cautiously optimistic about construction activity in the latter parts of 2026. Borrowing costs will like decline by the second half of the year, especially if broader inflation remains tame, and that will likely be accompanied by looser lending standards and a rebound in certain struggling subsegments.
There are also risks facing the industry. If statewide and regional economic growth slows, or even fails to accelerate, that will weigh on construction activity. Trade and immigration policy also represent significant risk factors, and tariffs have put renewed upward pressure on materials prices. Ultimately, the current environment continues to be defined by uncertainty, and project owners will remain reluctant to go forward with large investments until that improves.
Ultimately, the current environment continues to be defined by uncertainty, and project owners will remain reluctant to go forward with large investments until that improves.
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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