INPUT COST ANALYSIS
Construction employment essentially flat in 2025, January 2026 rebound led by nonresidential
US construction employment reached 8.31 million workers by January 2026, but revised data show the sector was essentially flat in 2025. Construction added 33,000 jobs in January 2026, the strongest monthly gain in months, concentrated among nonresidential specialty trade contractors (+25,100).
The construction unemployment rate registered 6.9% on a not-seasonally-adjusted basis in January 2026, elevated but consistent with typical winter patterns. Nonresidential employment advanced to 5.1 million workers by January 2026. This expansion reflects sustained activity in the sector throughout H2 2025 and into early 2026. Specialty trade contractors and heavy/civil engineering segments led nonresidential hiring, supported by ongoing federal infrastructure investment and semiconductor manufacturing buildout.
Source: Bureau of Labor Statistics
Wages outpace inflation as labor market stays tight
Construction wage growth moderated through 2025 but continued to outpace inflation. Average hourly earnings rose 3.8% year-on-year in Q4 2025 to $40.26, easing from 4.4% in Q4 2024. CPI growth ran at 2.8% over the same period, narrowing the real wage gap to under 1%, down from 1.7% a year earlier. Workers are still gaining purchasing power, which supports labor force retention, but the narrowing real premium through 2025 suggests the strongest period of catch-up has passed.
Source: Bureau of Labor Statistics
Construction labor is becoming more accessible
The construction labor market tightened through mid-2025 before reversing in Q4. The ratio of job openings to unemployed construction workers rose from 0.39 in Q1 to 0.64 by Q3, just above the post-pandemic average of 0.64, as the available worker pool shrank. In Q4, the ratio fell back to 0.54 as the number of unemployed construction workers climbed from 377,000 to 486,000, even as openings edged higher to 262,000.
The late-year softening suggests project completions or seasonal effects are freeing workers. While hiring conditions have eased modestly, the ratio remains well above the pre-pandemic average of 0.25, and any renewed surge in project starts could possibly re-tighten the market and push bid prices higher.
Source: Bureau of Labor Statistics
Rising material costs challenge project feasibility
The Supreme Court of the United States ruling removes IEEPA reciprocal duties on a broad range of imported components and finishes, but Section 232 tariffs of 50% on steel, aluminum and copper remain intact. A temporary 10% Section 122 surcharge now applies to all imports for up to 150 days. The net effect, however, is a partial de-escalation. Tariff-exposed categories such as structural steel, aluminum and copper still face 50% duties under Section 232, so price relief on those items will be limited. However, a wide range of imported components, finishes and mechanical equipment that were subject to IEEPA reciprocal rates should see meaningful cost reductions over the coming quarters.
The BLS Construction Materials composite rose 6.2% quarter-over-year in Q4 2025, a sharp acceleration from the 2.0% pace through mid-year, and as of January 2026, the monthly year-over-year reading reached 6.6%. The acceleration is almost entirely metals-driven: rebar and copper cable each surged nearly 17%, metal doors rose 13.6%, ornamental metalwork gained 11.8%, and structural steel climbed 8.6%, all reflecting the current tariff environment.
Non‑metal inputs show a more stable trend. Ready-mixed concrete was essentially flat, lumber slipped 1.2%, and plastic pipe fell 6.5%. Larger increases in asphalt paving and brick/block paving were the notable exceptions, with both seeing quarter-over-year increases north of 6.0%. The widening gap between metals and non-metals means that project-level cost exposure now depends heavily on material mix; steel and copper-intensive scopes face meaningfully different pricing conditions than wood-frame or concrete-dominated work.
Source: Bureau of Labor Statistics
Machinery and equipment pricing is stabilizing, though trade‑related pressures remain
The overall construction machinery and equipment index decelerated from double-digit growth during 2022-2023 to single-digit territory through H2 2025. The construction machinery and equipment PPI was up 5.0% year-over-year as of Q4 2025, re-accelerating after dipping to 0.6% in Q1 2025. Cranes rose 1.1% year-over-year, while generators gained 4.8% on continued data-center demand. Excavators declined 2.7% and forklifts were essentially flat.
Source: Bureau of Labor Statistics
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