Contractors are stepping into 2025 with a sense of optimism that’s hard to ignore. According to the 2025 Construction Hiring and Business Outlook Survey by the Associated General Contractors of America (AGC) and Sage, firms are anticipating a robust demand across nearly all public-sector segments and select private-sector markets. This upbeat sentiment is notably stronger than expectations for 2024, although it’s not without its caveats. Labor shortages and material price volatility loom large, casting a shadow over the otherwise bright horizon.
AGC CEO Jeffrey Shoaf articulated this duality, stating, “2025 offers quite a few bright spots for the construction industry even as the outlook for some private-sector segments remains quite dire.” The survey reveals that contractors are beginning to feel the positive impacts of the Infrastructure Investment and Jobs Act, passed in 2021. Ken Simonson, AGC’s chief economist, noted a significant uptick in federal infrastructure projects, with 18% of respondents reporting involvement in new federally funded projects, a notable increase from 9% the previous year.
Contractors are also eyeing the dollar value of upcoming projects with optimism. The survey indicated a positive net reading for 15 out of 17 construction categories. Notably, data centers, water and sewer, and power projects are leading the charge. However, private office and retail sectors have experienced declines, highlighting a mixed bag of opportunities. As Rex Kirby, CEO of Verdex Construction, pointed out, the post-election environment has sparked a surge in inquiries, signaling a renewed interest in construction projects.
Yet, the road ahead isn’t without its bumps. Project postponements and cancellations continue to plague the industry. A staggering 42% of firms reported that projects were postponed in 2024, with 34% experiencing cancellations that were not rescheduled. Rising costs and dwindling funding are the culprits behind these delays. The labor market is another thorn in the side of contractors; 62% of survey respondents cited rising labor costs as a top concern, while 59% pointed to an insufficient supply of skilled workers.
To combat these challenges, a significant majority—69%—of firms plan to increase their workforce in 2025, with nearly half expecting to boost headcount by up to 10%. However, the struggle to find qualified labor remains a significant roadblock. As Kirby aptly noted, “We have a great labor force. It’s a very hardworking labor force, but it’s a very unskilled labor force.” This sentiment resonates across the industry, prompting many firms to raise base pay and enhance benefits to attract talent.
On the materials front, 54% of contractors are concerned about rising costs, a worry compounded by potential new tariffs from the incoming Trump administration. AGC is advocating for a series of measures to alleviate these pressures, including new work visa programs, increased funding for construction training, and streamlined permitting processes.
In a bid to navigate these labor and material challenges, contractors are increasingly turning to technology. The survey highlighted artificial intelligence as the primary area for investment, with 44% of firms planning to allocate resources toward AI. This trend reflects a broader push for efficiency amidst workforce constraints. As Dustin Stephens from Sage pointed out, “AI’s potential to revolutionize construction workflows is driving increased interest and investment.” Alongside AI, investment in document management, accounting, and project management software is also on the rise.
As the construction industry gears up for 2025, it’s clear that while optimism abounds, the challenges are formidable. The interplay between rising demand, labor shortages, and material costs will shape the landscape of construction in the coming year. How firms navigate these complexities will not only determine their success but could also redefine the industry’s future trajectory.
