News Summary
Small construction firms are struggling with labor shortages and rising material costs, leading to a decline in their project backlog. The disparity between smaller and larger contractors is growing, with larger firms continuing to expand. The construction industry faces multiple challenges, including trade tariffs, policy uncertainties, and a significant need for immigration reform to address workforce shortages. Despite these hardships, confidence among contractors remains stable, but the economic impact of delays due to labor shortages emphasizes the urgency for solutions.
Washington, D.C. – Small construction firms are facing significant challenges due to labor shortages and rising material costs, resulting in a strained project pipeline. According to recent industry reports, contractors with revenues under $30 million are feeling the impact more acutely than their larger counterparts. In August, data indicated a decline in backlog for these smaller contractors, highlighting a growing divide between small and larger construction companies, with those earning over $100 million continuing to expand their project pipelines.
Anirban Basu, the chief economist of the Associated Builders and Contractors (ABC), pointed out that the decrease in backlog correlates with ongoing declines in nonresidential construction spending. Specifically, while the backlog for heavy industry and infrastructure categories remained stable, commercial and institutional backlog has decreased significantly, now averaging only 8.3 months.
This decline in private construction work is attributed to multiple factors including rising material costs, ongoing policy uncertainties, and a resurgence of labor shortages that were exacerbated by the COVID-19 pandemic. Current reports indicate that approximately 25% of contractors are experiencing project disruptions due to trade tariffs, leading to delays or even cancellations of contracts.
Despite these hurdles, contractor confidence remains stable; however, uncertainties related to economic headwinds complicate predictions for the future. Industry leaders have described the construction workforce crisis as a potential national security threat, with considerable urgency surrounding the matter highlighted during the Elevate 2025 conference.
Panel discussions during the conference focused on potential solutions to address the workforce shortage, including calls for immigration reform and targeted recruitment initiatives aimed at veterans and women. Labor Secretary Lori Chavez-DeRemer emphasized the critical need for accessible immigration processes for companies that depend on foreign workers. Furthermore, a significant issue is the fact that many veterans transition to civilian jobs but leave these roles within a year, suggesting a need for enhanced retention strategies across the construction industry.
Despite the pressing need for labor, only 10% of construction firms are utilizing temporary work visa programs to alleviate labor shortages. An Associated General Contractors (AGC) survey revealed that a staggering 92% of construction firms are struggling to find qualified workers, which has resulted in numerous project delays. Approximately 78% of firms experienced delays related to worker shortages within the past year, contributing to an overall economic impact estimated at $10.8 billion annually due to extended project timelines.
Additionally, the construction industry has suffered a loss of nearly a million jobs due to the pandemic, with a substantial number of workers opting not to return. This has intensified the sector’s reliance on undocumented immigrant labor, which has further complicated budget issues and project timelines. Furthermore, a report indicated that nearly half of construction firms cite poor leadership as a factor driving women out of the industry, indicating an urgent need for improved role models and career support.
Amid these challenges, the number of open construction jobs surged by 26% by the end of July 2023, reaching the highest level in over a year. The construction industry is actively investing in workforce development and technology solutions to mitigate labor shortages. The AGC is advocating for increased funding for vocational education programs as a long-term strategy to address workforce challenges in the construction sector.
As smaller construction firms navigate these complex issues, the divide with larger firms continues to grow, calling for immediate action and strategic solutions to sustain the industry and ensure its future viability.
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Additional Resources
- Construction Dive: Labor Crisis as National Security Issue
- Scotsman Guide: Labor Shortages and Immigration Crackdowns
- AZoBuild: Article on Construction
- Wikipedia: Construction Industry
- Axios: Trump and Immigration Impact on Construction
- Google Search: Construction Labor Shortage
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