Construction Industry 2026 Outlook: 3 Key Areas to Keep In Mind
Within the construction industry, there are many moving parts. Over the past few years there have been many challenges facing companies, from the ongoing labor gap to increased project costs. Given these trends and changes, what are some key items to keep in mind going into 2026?
Labor Trends
One positive trend is a greater interest in vocational training which has continued to grow over the past few years. According to the National Student Clearinghouse Research Center, enrollment in these two-year schools has increased almost 20% since the Spring of 2020.
Additionally, modernizing recruiting tactics may be a valuable tool to draw in younger workforce members. As noted in a survey by the Associated General Contractors of America (AGC) and the National Center for Construction Education and Research (NCCER), 55% of firms have implemented social media and targeted advertising, while 52% of firms have engaged in programs with high schools and colleges for recruiting. Another useful tool for building a talent pipeline and positive firm reputation would be internships. Internships allow a company to identify promising individuals early-on. Positive internship experiences can also add to a quality reputation, in turn attracting more recruits.
The challenge in closing the labor gap is not only attracting a younger workforce to bridge the labor gap but retaining those workers, as well. According to the Bureaus of Labor Statistics, turnover due to voluntary separation has increased by 56,000 from July of 2024 to August of 2025.
As the emerging workforce priorities shift, companies should make note of a few key areas for improved recruiting and retentions rates.
- Work-life balance (including ability to take time off)
- Flexible schedules (full-time or part-time)
- Safety (both physical and mental wellbeing)
- Opportunities for growth and development (internships, trainings)
- Benefits (health care, leave)
Tariffs
Tariffs are taxes imposed on imported goods upon entry into the United States.
The 2025 Workforce survey, conducted by the AGC and NCCER, noted many companies have already taken action regarding actual or proposed tariffs. The most notable response was to increase bid prices, as 41% of contractors implemented this strategy. The second most utilized strategy (at 39%) has been accelerating the purchase of key materials.
When considering how tariffs will impact work and customer relations, take note of three key items:
- Tariff policies (import specific, reciprocal tariffs, tariff stacking, country specific)
- Cost-sharing tariffs or reduction of gross profit
- Benefits of domestic versus foreign suppliers
Interest
The Federal Reserve Target Rates are set by the Federal Open Market Committee (FOMC) as interest banks charge for overnight loans. These rates shift in response to the current and expected economic needs. Factors which impact the federal rate include:
- Unemployment rate
- Inflation
- Economic outlook
Over the past three years, inflation rates have decreased and steadied out to the standard of two to three percent each year. In response, the Federal Rates have decreased from the peak over 2023 and 2024 of 5.25-5.5% to 3.75-4% as of October 2025.
The impacts of the reserve rate decrease can be seen in the corresponding decrease for the following rates per the Federal Reserve Bank of St. Louis as of November 20, 2024, and 2025, respectively.
- Prime rate – 7.75% and 7.00%
- 1-month SOFR – 4.7% and 4.08%
- 15-year mortgage rate – 6.02% and 5.54%
- 30-year mortgage rate – 6.84% and 6.26%
This trend bodes well for steady, if not an additional decrease in, interest rates going into 2026.
Final Thoughts
The construction industry continues to face many challenges including an aging workforce population, employee retention, growing labor and material costs, as well as increased borrowing rates. With trends for growing vocational training, decreasing interest rates and mindfulness of changes in policies regarding tariffs, it is hopeful the construction industry may continue to improve and grow in 2026.
For more information about McKonly & Asbury’s Architecture, Engineering, and Construction (AEC) experience, visit the AEC Industry Page and don’t hesitate to contact a member of the AEC team.
About the Author
Kayla Smith joined McKonly and Asbury in 2024 and is currently a Senior Accountant with the firm. She is a member of the firm’s Audit and Assurance Segment, as well as a member of our AEC and Employee Benefit Plans teams.
