Michael Latas & Associates
Construction Report - August 2026
|
Executive Summary
Construction Employment Defies Broader Labor Market Weakness The U.S. economy lost 23,000 jobs in July, while the unemployment rate remained relatively low at 4.1%. Construction, however, moved in the opposite direction, adding 22,000 jobs during the month and bringing total industry employment to approximately 8.34 million. The gains reinforce construction's relative strength even as overall employment growth has weakened. Nonresidential construction continues to be a particularly important source of demand for skilled labor. Contractors remain challenged in recruiting experienced superintendents, project managers, electricians, pipefitters, HVAC technicians and other skilled trades. Contractor Backlog Drops Sharply in July Associated Builders and Contractors' latest Construction Backlog Indicator fell to 8.0 months in July, down sharply from 8.8 months in June and 8.8 months a year earlier. Every industry, geographic region and contractor size category experienced a decline during the month, with the South the only region maintaining a higher backlog than one year ago. Despite the decline, contractors remain relatively optimistic. ABC's confidence measures for sales and staffing declined in July, while expectations for profit margins improved. All three measures remain above 50, indicating contractors continue to expect growth over the next six months. Demand remains particularly attractive in:
Large Contractor Highlights EMCOR Group EMCOR delivered another record quarter, reinforcing the strength of mechanical, electrical and mission-critical construction. Highlights include:
Quanta Services Quanta reported exceptional second-quarter results and a record order book as investment in electrical infrastructure, power generation and mission-critical facilities continues. Highlights include:
MasTec MasTec also reported record second-quarter results:
AECOM AECOM reported fiscal third-quarter results on August 10, with a more mixed earnings picture but exceptionally strong underlying demand. Highlights include:
M&A Activity M&A activity remains active, particularly around electrical and mission-critical contractors. In one of the more notable transactions, MasTec completed its acquisition of The Superior Group, a major electrical contractor serving data center and mission-critical markets. Quanta Services also continued its acquisition strategy, completing acquisitions including Phalcon and Enerfab, further expanding its electrical, mechanical and fabrication capabilities. Strategic buyers continue targeting firms specializing in:
Trends to Watch AI and Data Centers Continue Reshaping Construction Data center development remains one of the industry's most powerful growth engines. The opportunity extends well beyond building construction into electrical contracting, HVAC and mechanical systems, backup generation, utility infrastructure, transmission and site development. Power Infrastructure Is Becoming as Important as the Data Centers Themselves Record backlogs at Quanta, EMCOR and MasTec demonstrate that the AI infrastructure boom is increasingly becoming an electrical and power-generation story. Utilities, transmission contractors, electrical contractors and power-generation infrastructure providers are benefiting from unprecedented electricity demand. Backlog Sends a Note of Caution ABC's decline from 8.8 to 8.0 months is significant and suggests that strength is increasingly concentrated in certain end markets and larger projects. Traditional commercial construction remains more sensitive to financing costs and economic uncertainty. Material Costs Are Rising Again Construction input prices were essentially flat in July, increasing 0.1% for the month, but are now 7.4% higher than one year ago. Rising material costs could pressure margins, particularly on projects without adequate escalation protection. Labor Remains Tight Construction's addition of 22,000 jobs during a month in which total U.S. payroll employment declined by 23,000 demonstrates the industry's continued need for workers. Experienced project managers, estimators, superintendents and skilled trades remain difficult to recruit. |