Labor, tariffs collide with data center boom

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Dive Temporary:

• Sixty-five p.c of contractors anticipate the information heart building market to develop over the subsequent 12 months, in comparison with 8% who assume it would shrink, in line with the Associated General Contractors of America’s 2026 construction hiring and business outlook, launched on Jan. 8.
• Contractors are additionally more and more bullish about energy initiatives, the one different sector to submit a better studying than in 2025. Outdoors these two teams, companies reported weaker sentiment. 
• For instance, contractors’ outlook for transportation and infrastructure on the general public facet weakened over the previous yr, as did expectations for warehouse and multifamily initiatives within the non-public sector.

Dive Perception:

AGC’s survey on hiring and enterprise provides extra granularity to the evolving outlook for construction in 2026, notably in the case of labor. 

The uneven forecast arrives as companies anticipate labor challenges to linger in 2026. For instance, about 82% of companies report problem filling hourly craft positions and 80% battle to fill salaried roles.That has led to challenge uncertainty, with about 60% of respondents saying a challenge has been postponed or canceled inside the previous six months.

Throughout a webinar to current the survey’s findings, panelists talked about an business with booming demand for sure sorts of builds, notably knowledge facilities and energy initiatives that assist these services. However for contractors exterior of that increase, deep-rooted challenges are as soon as once more prime of thoughts.

The share of firms struggling to fill open positions climbed to its highest stage previously three years, mentioned Ken Simonson, chief economist at AGC. That’s an enormous concern, coupled with the truth that seasoned execs are beginning to go away the workforce, mentioned Kyle Van Slyke, chief working officer at Musselman & Corridor Contractors, an Overland Park, Kansas-based building firm. 

“Our greatest problem is that this workforce,” mentioned Van Slyke in the course of the name. “The senior management that continues to retire and never be replenished is actually hurting our market.”

Immigration enforcement has additionally begun to impression workflows on jobsites.

About 33% of companies reported being affected by immigration enforcement actions previously six months, both via employees not displaying up or subcontractors shedding labor. One other 6% of companies reported cases of Immigration and Customs Enforcement officers displaying up at a jobsite or workplace.

Tariffs are additionally a thorn in contractors’ sides.

Roughly 70% of contractors mentioned tariffs affected business in 2025, per AGC’s outlook. That prompted 40% of companies to lift bid costs and about one third to speed up supplies purchases. About 35% companies handed most or all tariff-related prices to homeowners, although 11% mentioned they absorbed most or the entire tariff prices, in line with the survey.

“2026 affords a handful of clear shiny spots amid a rising variety of challenges, reflecting the blended outlook reported all through the survey,” AGC CEO Jeffrey Shoaf mentioned in the course of the name. “Affiliation officers proceed to induce the administration and Congress to handle building workforce shortages in each brief time period and long run measures.”