The construction industry has witnessed a significant uptick in employment and wages, surpassing the broader economy's growth rates. Industry leaders express optimism about future project demand and anticipate continued expansion in 2025, provided they can secure skilled labor. This article delves into the latest data and expert insights, exploring the challenges and opportunities ahead.

Ahead of the Curve: Construction Poised for Stronger Expansion

Employment Surge Outpaces Broader Economy

In December, the construction sector added 8,000 new positions, bringing the total workforce to 8,316,000—a 2.4 percent increase over the year. This growth significantly outperformed the 1.4 percent rise in nonfarm employment. Nonresidential contractors saw a robust 3.0 percent increase, adding 145,300 jobs, while residential construction grew by 1.5 percent, with an additional 51,000 positions. Despite recent slowing job gains, the industry remains on a steady upward trajectory.The momentum is expected to continue into 2025, as contractors anticipate further expansion. Ken Simonson, the chief economist of the Associated General Contractors of America, remarked, "While job growth has slowed slightly, the construction sector continues to add workers at a faster pace than the overall economy." This trend underscores the sector's resilience and its pivotal role in driving economic development.

Wage Growth Exceeds Private Sector Averages

Average hourly wages for nonsupervisory employees in construction climbed by 4.2 percent in 2024, reaching $36.44 in December. This increase surpassed the private sector's 3.8 percent gain, positioning construction wages 19 percent higher than the average across all industries. The wage hike reflects both the growing demand for skilled labor and the industry's commitment to rewarding its workforce.Higher wages not only attract more talent but also contribute to better worker retention and productivity. For employers, offering competitive compensation is crucial in attracting qualified professionals who can meet the increasing demand for projects. As the industry expands, ensuring fair pay will remain a priority for sustaining growth.

Positive Outlook Across Multiple Project Types

A survey conducted by the Associated General Contractors of America, in collaboration with Sage, revealed widespread optimism among contractors for 2025. Sixty-nine percent of the 1,100 respondents expect to expand their workforce, driven by anticipated growth in various project categories. Data center construction topped the list, with contractors expressing strong confidence in this sector's future prospects.Other areas showing promise include water and sewer infrastructure, power projects, transportation facilities, manufacturing plants, healthcare facilities, and bridge and highway work. The survey highlights a balanced outlook, with only private office and retail construction facing slightly less favorable expectations. Overall, the positive sentiment indicates a robust pipeline of projects that could fuel further job creation and economic activity.

Challenges Remain Amidst Growing Opportunities

Despite the optimistic forecast, contractors face several challenges that could impede progress. Workforce shortages remain a pressing concern, with many firms struggling to find qualified personnel. Additionally, complex permitting processes and opaque procurement waiver systems create unnecessary delays and inefficiencies.Association officials have urged policymakers to address these issues, particularly regarding potential tariffs on construction materials. They emphasized the need for the incoming administration to ensure that any new trade policies do not inflate material costs, which could undermine critical infrastructure and economic development projects. Jeffrey D. Shoaf, the association’s CEO, stated, "If contractors lack the necessary workforce or face prohibitive material costs, construction—and consequently, economic activity—will be delayed and become more expensive."Investing in education and training programs is another key recommendation. By expanding lawful pathways for individuals to enter the construction field, the industry can bolster its workforce and maintain its growth momentum. Addressing these challenges head-on will be essential for realizing the full potential of the construction sector in 2025 and beyond.