Washington, D.C., September 18, 2025
News Summary
The construction industry faces significant challenges, with small firms struggling due to labor shortages and rising material costs. Smaller contractors report declining project backlogs, impacting their future prospects, while larger firms continue to thrive. A recent ABC report highlights a decrease in nonresidential construction spending, with staffing shortages leading to project delays costing billions annually. Industry experts call for urgent recruitment reforms and improved retention strategies, particularly for veterans and women, to address the workforce crisis and bolster the sector’s stability.
Washington, D.C. – The construction industry is facing significant challenges as labor shortages and rising material costs strain small construction firms. Contractors with annual revenues below $30 million are experiencing decreased project backlogs, jeopardizing their future pipelines as larger firms continue to thrive. According to recent data, the backlog for these smaller firms has significantly declined, reflecting a widening gap between them and those with revenues exceeding $100 million, who are still expanding their projects.
The American Builders and Contractors (ABC) report indicates that the drop in backlog correlates with a decrease in nonresidential construction spending, including a notable decline in commercial and institutional backlog. Presently, this segment stands at an average of 8.3 months, almost a full month less than previously recorded. In contrast, the backlog for heavy industry and infrastructure projects remains steady, suggesting that the impacts of market dynamics are disproportionately affecting smaller entities.
Rising material costs and persistent labor shortages are primarily blamed for this decline. Tariffs have also played a role, with 25% of contractors reporting that they have faced project delays or cancellations due to these trade barriers. Despite stable contractor confidence levels, economic uncertainties pose challenges for future market stability in the construction sector.
The recent Elevate 2025 conference emphasized the escalating workforce crisis within the industry, with leaders labeling it a national security threat. Discussions focused on the urgent need for immigration reform and targeted recruitment strategies, particularly aimed at veterans and women who could help mitigate the workforce shortages plaguing the construction industry. Labor Secretary Lori Chavez-DeRemer has underscored the necessity for accessible immigration systems, which are crucial for businesses that depend on foreign labor.
Despite these efforts, the construction industry is grappling with high turnover rates among veterans, with many exiting their initial civilian jobs within a year. This trend points to a broader issue regarding retention strategies across the industry. Alarmingly, only 10% of construction firms utilize temporary work visa programs, exacerbating the existing labor shortages.
An AGC survey reveals that 92% of construction firms struggle to find qualified workers due to significant gaps in labor supply. Consequently, 78% of firms reported project delays over the last year, leading to an economic impact of around $10.8 billion annually due to increased project timelines stemming from labor deficits. The aftermath of the pandemic has exacerbated the situation, with almost a million construction jobs lost and many workers opting not to return.
The reliance on undocumented immigrant labor has only intensified these delays and budget challenges faced by firms. Furthermore, nearly half of the construction companies surveyed indicated that ineffective leadership is discouraging women from pursuing careers in the industry, signaling an urgent need for enhanced role models and career support systems to retain female talent.
Despite these hurdles, the number of open construction jobs has risen by 26% as of late July, reaching the highest level in over a year. As a response, the industry is investing in workforce development initiatives and technology adaptation aimed at overcoming the labor shortages. The AGC advocates for increased funding for vocational education, aiming to address the long-term workforce challenges within construction.
Conclusion
The construction sector must confront these multifaceted challenges, including labor shortages and rising material costs, which are diminishing opportunities for small contractors. Without strategic interventions, the divide between small and large firms may continue to widen, impacting the overall health of the industry.
Frequently Asked Questions
What are the main challenges facing small construction firms today?
Small construction firms are facing labor shortages, rising material costs, and project backlog declines. These factors lead to difficulties in securing future projects compared to larger firms, which continue to expand.
What is the current status of the construction workforce?
The construction workforce is experiencing severe shortages, with 92% of firms having trouble finding qualified workers. The industry also faces high turnover, particularly among veterans, contributing to the overall crisis.
How is the construction industry addressing these issues?
The industry is investing in workforce development, advocating for immigration reform, and promoting vocational education funding to recruit and retain skilled labor. However, utilization of temporary work visa programs remains low, complicating efforts to fill positions.
Industry Overview Chart
| Aspect | Status |
|---|---|
| Construction Firms Under $30M Revenue | Experiencing project backlog declines |
| Construction Firms Over $100M Revenue | Expanding project pipelines |
| Percentage of Firms Struggling with Labor | 92% |
| Economic Impact of Labor Shortages | $10.8 billion annually |
| Percentage of Firms Reporting Project Delays | 78% |
| Open Construction Jobs Increase (July) | 26% |
Deeper Dive: News & Info About This Topic
HERE Resources
Norfolk School Board Delays Decision on School Closures
Burns & McDonnell Opens Construction Academy in Pearland, Texas
Jeffersonville Golf Club Unveils Revitalized Course and Clubhouse
Portland Begins Construction of New Crosswalks on 82nd Avenue
New Richmond Launches Liberty Landing Project
Burlington’s Main Street Businesses Face Challenges due to Construction
Community Unity in the Adirondacks for Fishing and Conservation
Record Funding Announced for Farm to School Grant Program
Evanston Considers School Closures Due to Financial Struggles
Omaha Streetcar Project Draws Concerns from Local Businesses
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
Author: STAFF HERE PHILADELPHIA WRITER
PHILADELPHIA STAFF WRITER The PHILADELPHIA STAFF WRITER represents the experienced team at HEREPhiladelphia.com, your go-to source for actionable local news and information in Philadelphia, Philadelphia County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Mummers Parade, Philadelphia Flower Show, and Thanksgiving Day Parade. Our coverage extends to key organizations like the Greater Philadelphia Chamber of Commerce and United Way of Greater Philadelphia, plus leading businesses in telecommunications, food services, and healthcare that power the local economy such as Comcast, Aramark, and Children's Hospital of Philadelphia. As part of the broader HERE network, we provide comprehensive, credible insights into Pennsylvania's dynamic landscape.
