News Summary
The construction industry faces a challenging second half of 2025 as labor shortages and declining private activity persist. Key indicators highlight significant downturns, with most private nonresidential sectors losing momentum, while tariffs and rising costs lead to project delays and cancellations. Although some segments like manufacturing construction see growth, overall spending trends indicate obstacles ahead. Contractors are raising wages amid competition for skilled labor, navigating a complex environment shaped by federal policies, inflation, and evolving market demands.
Washington D.C. – The construction industry is anticipating a challenging second half of 2025, with key indicators suggesting a significant decline in private activity and continuing labor shortages, according to recent assessments by industry experts. Data indicates that the recent downturn in construction activity is more substantial than reported figures, highlighting critical issues affecting the sector.
Most private subsegments of nonresidential construction have seen a loss of momentum, with the exception of religious projects, which account for less than 1% of total activity, and power projects primarily driven by data center needs. July’s figures showed a decline attributed to rising costs and persistent labor shortages. In particular, about 16% of contractors reported experiencing project cancellations, delays, or scale-backs due to tariffs. Labor challenges led 45% of contractors to indicate that they faced delays in their projects.
Moreover, 26% of construction firms adjusted their project demand in response to changes in federal policies regarding funding, taxes, and regulations. Although public nonresidential spending grew by 3.1% over the past year, private nonresidential construction spending fell by 3.7%. Commercial project spending decreased by 0.8% in July, with manufacturing-related construction also seeing a decline of 0.7%.
Tariffs have proven disruptive to project flow, with one in four ABC members indicating they encountered interruptions or cancellations due to these import taxes, leading up to significant hikes in August. Current surveys reflect ongoing challenges in the sector, particularly regarding labor shortages and the rising costs of materials, which continue to impact operations.
Despite these hurdles, spending within the manufacturing construction sector has notably doubled since the end of 2021. This growth has been fueled by trends such as near-shoring and favorable government initiatives, including the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS Act. In-demand sectors like advanced manufacturing, healthcare, life sciences, and data centers are growing but facing their own struggles with increased costs and labor shortages.
In response to these difficulties, contractors are compelled to raise wages in an effort to retain their workforce, despite facing pressure on their profit margins. There is an escalating geographic competition for skilled labor in specialized construction trades, which adds to the ongoing recruitment challenges faced by the industry.
Advanced markets, particularly in healthcare and life sciences, are also grappling with volatile prices and extended lead times for essential equipment, further complicating project timelines and budgets. As of July 2024, the U.S. construction workforce reached 8.3 million, surpassing previous levels, yet the industry continues to deal with significant talent shortages that impact productivity and growth.
Looking ahead, project demand in the construction sector is likely to be influenced by anticipated decreases in interest rates and continued government investment. Companies are faced with the dual challenges of optimizing resource allocation while contending with the ongoing impacts of inflation and rising material costs.
The current landscape presents a complex set of obstacles for the construction industry, underscoring the need for strategic adjustments and adaptive measures to navigate these challenges and explore potential growth avenues amid the ongoing difficulties.
Deeper Dive: News & Info About This Topic
HERE Resources
La Center Teachers Strike Over Pay and Working Conditions
Owensboro Implements Stricter Property Maintenance Standards
Construction Industry Faces Challenges from Tariff Volatility and AI Integration
Frustration Grows Over New Britain School Bus Issues
Altadena Faces Housing Market Challenges Amid Tariff Discussions
Indianapolis Hosts Labor Day Protests Focused on Worker Concerns
Construction Worker Shortages Impact Major Projects
Logan County School Board Votes on Nickel Tax for Auburn Elementary
Texas A&M Board of Regents Approves New Aplin Center
Transportation Issues Lead to School Cancellations in Susquehanna Township
Additional Resources
- Nixon Peabody: California Construction Challenges Amid Rising Demand
- JLL: Growing Industry Sectors Face Unique Construction Challenges
- Autodesk: Construction Innovations
- Deloitte: Engineering and Construction Industry Outlook
- For Construction Pros: A Perfect Storm of Challenges in the Concrete Industry
- Wikipedia: Construction Industry
- Google Search: Construction Industry 2025
- Google Scholar: Construction Industry Trends
- Encyclopedia Britannica: Construction
- Google News: Construction News
Author: STAFF HERE INDIANAPOLIS WRITER
INDIANAPOLIS STAFF WRITER The INDIANAPOLIS STAFF WRITER represents the experienced team at HEREIndianapolis.com, your go-to source for actionable local news and information in Indianapolis, Marion County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Indianapolis 500, Indy Jazz Fest, and the Indiana State Fair. Our coverage extends to key organizations like the Indy Chamber and Visit Indy, plus leading businesses in motorsports and healthcare that power the local economy such as Indianapolis Motor Speedway and IU Health. As part of the broader HERE network, we provide comprehensive, credible insights into Indiana's dynamic landscape.
