Construction industry resilient despite higher prices

Despite ongoing labor challenges, higher fuel prices and pushback against data center megaprojects, the country’s contractors are doing better than expected.

That’s according to Macrina Wilkins, the director of market insights at the Associated General Contractors of America, for the association’s mid-year economic update.

“Since the start of 2026, the construction industry has become stronger than anticipated,” Wilkins said in a video posted in late June.

Construction employment has grown 8.8% year-over-year with an increase of nonresidential employment jobs – mainly driven by data center demand, she added.

Data centers have kept construction growing over the years, with the sector growing 28% year-over-year in the month of April, Wilkins said. Seasonally adjusted, around $50 billion is spent each month on data centers.

However, construction still faces some weak points such as materials, which have seen price escalation after tariffs and shocks to oil and energy supplies.

Diesel fuel was up 74% year-over-year, and the industry is seeing price increases for steel mill products, copper, aluminum, trucking and transportation services.

Another potential headwind for construction is pushback on data centers, Wilkins said.

In January, the village of DeForest abruptly canceled a $12 billion data center proposal that had been in talks for months. Staff worked for several months with Virginia-based QTS Data Centers before publicly announcing the proposal, sparking concerns around transparency.

In Janesville, the city council voted to let a letter of intent with Viridian Acquisitions expire, essentially halting plans for a data center at the city’s GM/JATCO industrial site, Spectrum News reported.

Other Wisconsin communities have raised concerns over air and water quality as data centers are built in Beaver Dam, Port Washington and Mt. Pleasant.

Wilkins said there was resiliency across the industry, but also demand and work grew in different private, non-residential sectors.

The value of construction starts climbed 6.4% year-to-date in May 2026, ConstructConnect reported through the AGC Data DIGest. Nonresidential building starts jumped 19% year-to-date and commercial starts were up 74%. This was led by a 244% leap in combined office and data center starts.

Value of starts on institutional construction was up 16% and industrial, specifically manufacturing, fell 61%. Civil engineering starts rose 15% year-to-date, with roads up 2.2%, water and sewage treatment up 19%, bridges up 12% and electric power infrastructure up 2.7% year-to-date.

Some of the low points were airports and residential starts, down 36% and down 20% year-to-date respectively.

“Despite the lack of headlines, opportunities abound for those not involved with data centers or megaprojects,” said Michael Guckes, chief economist at ConstructConnect, in a statement.

Some categories have seen “explosive growth” outside the data center realm, including power generation, power infrastructure, water, sewage and treatment. Military spending, hospitals and clinics and shopping were also fast-growing subcategories.