The bulk of May’s growth came from the nonresidential sector, which added 15,700 jobs. Within that category, specialty trade contractors led the way with 11,400 new positions, followed by gains in heavy and civil engineering (2,600) and nonresidential building construction (1,700).

“In contrast to the modest job gains in the broader economy, nonresidential construction firms keep adding workers and boosting pay,” said Ken Simonson, chief economist for AGC. “The sector has strong demand from data centers and related power and manufacturing projects, all of which require highly paid, skilled workers.”

ABC Chief Economist Anirban Basu described that demand as “insatiable,” helping to sustain job growth and contractor optimism for the coming months. “The industry’s recent job growth, driven by insatiable demand for data centers and ongoing growth in publicly funded construction activity, appears set to continue over the coming months. Contractors also remain broadly optimistic about growing their staffing levels over the next six months,” Basu said, citing ABC’s Construction Confidence Index.

While nonresidential construction is expanding, the residential sector is showing signs of strain. Residential construction employment rose slightly in May, adding 900 jobs, but remains down by 33,300 positions compared to a year ago. Losses were concentrated among residential building contractors, who cut 1,700 jobs during the month and 8,200 over the year.

The decline reflects ongoing challenges in the housing market, including high borrowing costs and tight lending conditions, which economists say are limiting new home construction activity.

Construction workers also saw stronger wage growth than many other industries. Average hourly earnings for production and nonsupervisory construction workers climbed to $38.97 in May — about 20.6% higher than the private-sector average. Pay has increased 5.0% over the past year, compared with 3.6% for production workers across all industries.

The construction unemployment rate stood at 4.1% in May, slightly below the overall U.S. unemployment rate of 4.3%, which remained unchanged. “The bigger story in the May jobs report, however, is the surprising strength of the broader labor market,” Basu said. “Economywide job growth has accelerated, rising to a pace not seen since the early months of 2024, and the unemployment rate held steady at a perfectly acceptable 4.3% in May. This is an indication of broader economic resilience, albeit one that is not necessarily encouraging for the construction industry.”

That strength may also keep inflation pressures alive, increasing the likelihood of higher interest rates. “The combination of a stable labor market and resurgent inflation suggests that rate hikes are now more likely than rate cuts over the next several quarters, and high borrowing costs and tight lending standards will continue to weigh on construction activity during the months ahead,” Basu added.

Industry leaders are also warning about non-economic threats to continued growth. AGC officials say opposition from local communities to new data center projects – often driven by concerns about environmental impact and infrastructure strain – could slow development and reduce job creation.

Additionally, uncertainty in federal infrastructure policy could affect employment. If Congress fails to pass a new highway and transit funding bill before the current authorization expires at the end of September, construction spending and hiring could decline. “The construction industry will continue to add jobs and boost pay as long as demand remains strong,” said Jeffrey D. Shoaf, AGC’s chief executive officer. “But if politicians restrict that demand, or fail to invest in new projects, then construction employment will suffer.”

Despite the risks, both groups report that contractors remain cautiously optimistic, citing strong backlogs and expectations for additional hiring in the near term. Still, economists emphasize that the trajectory of the industry will depend heavily on interest rates, public policy decisions, and whether demand for large-scale infrastructure – particularly data centers – can overcome mounting resistance.