Forecast 2026 (CONT’D FROM PAGE 32)
Meanwhile, contractors attached to the commercial, of- fice and hotel markets are feeling the sting of a slowing economy, high interest rates, and an environment rife with uncertainty. “Many areas of non-residential are trending flat or edging down,” said Conerly. “Even the chip fabs, while still strong, are tapering down.” The one bright construction sector: data centers. They show no signs of diminishing and are big customers for electricians, plumbers, and suppliers of scaffolding and manufactured products of all kinds. “When I look at the detail and the economic statistics of what kind of capital equipment is being bought, I am seeing a lot of data cen- ter-related equipment in there,” said Conerly. “Data cen- ters also require a lot of garden variety wiring, connectors, and plumbing for cooling.” Every sector of the construction industry shares a com- mon challenge: labor availability. Oxford Economics fore- casts an unemployment rate of 4.4 percent and 4.3 per- cent at the end of 2025 and 2026, respectively. That’s not much higher than the 4.1 percent clocked at the end of 2024. Low unemployment, largely due to slowing growth in the nation’s working age population and aggressive im- migration policies, can result in rising labor costs. Business Confidence For all business sectors, money and labor are not the only production factors on the rise. “The real problem is the world has become much more expensive in the last
having an effect on the housing market. Oxford Economics expects starts to fall by 4.3 percent in 2025 and decline by another 2.3 percent in 2026 after dropping by 3.5 per- cent in 2024. Prices for existing homes are expected to increase only 1.5 percent in 2025 and 2.3 percent in 2026 after rising by 4.4 percent in 2024. Concerned about the rising cost of living, consumers are cutting back on spending of all kinds. Their hesitancy affects the retail sector, which is an important driver and bellwether of the economy. “Our forecast for year-over- year retail sales growth is 3.8 percent for 2026, down from the 4.5 percent of 2025,” said Scott Hoyt, Senior Director of Consumer Economics for Moody’s Analytics (economy. com). Much of the increase in both years is due to inflation. “High prices are a bit of a mixed bag,” said Hoyt. “They undermine consumer purchasing power and confidence, but they also support nominal sales by lifting the prices of the goods retailers are selling.” Construction Woes Outside of the single-family home market, contractors are having problems of their own. Multifamily builders, working through a backlog of units under construction, are hesitant to break ground on new ones. “I think we’ll see less multifamily construction in 2026,” said Conerly. “Vacancy rates are going up and rents have been coming down at the rate of about one percent a year.”
CONTINUED ON PAGE 36
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October 20, 2025
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