Latest construction data shows weakening market to start 2026

The construction industry faced a softening market in the first two months of 2026, characterized by declining nonresidential planning and the slowest hiring rate on record. While large-scale data center projects and commercial starts provided some momentum, rising input prices and geopolitical instability have begun to weigh on broader sector activity. These trends suggest a growing caution among contractors as they navigate surging energy costs and potential project delays.

Economic indicators through February 2026 reveal a cooling construction landscape, with nonresidential planning dropping for two consecutive months and labor turnover hitting its lowest point since 2000. According to Anirban Basu, chief economist at Associated Builders and Contractors (ABC), slow hiring and minimal job separations indicate a stagnant labor market where contractors are growing more cautious about expanding their workforces. This trend is mirrored in the planning phase, where builders are increasingly hesitant to commit to large-scale pipeline growth amidst significant economic uncertainty.

A primary driver of this market softening is the staggering rise in construction input prices, which increased at an annualized rate of 12.6% through February. Sarah Martin of Dodge Construction Network noted that builder confidence is being strained by increased costs and geopolitical risks, specifically citing the conflict in Iran as a factor that has yet to be fully reflected in current data sets. Rising energy prices have already led some project owners to delay work, while major builders reported in recent earnings calls that they are forced to implement new strategies to navigate sudden fuel price spikes that threaten project margins.

Despite the broader softening, the market remains bifurcated with activity heavily concentrated in specific niches and among larger firms. Contractor backlogs and nonresidential starts saw slight improvements in February, but this growth was largely driven by commercial construction and massive data center projects fueled by artificial intelligence demands, while traditional sectors like healthcare and warehouses languished. To combat these headwinds, industry leaders at the National Institute of Building Sciences Building Innovation conference highlighted the role of digital tools in improving project timelines, though the absence of massive energy-related projects continues to slow total groundbreakings.