This is your July 2026 construction economic forecast in plain language – a mid-year snapshot built for contractors, estimators, and executives operating in North and South Carolina who need to know how the back half of 2026 is shaping up and what to do about it.

Key Takeaways

• The core paradox of mid-2026: contractor confidence and construction backlog remain solid even as private nonresidential construction spending has declined for seven straight months, with data center projects dominating investment while manufacturing, lodging, and commercial segments soften.
• Total U.S. construction spending in May 2026 was about $2.21 trillion, roughly flat month over month and down around 1.5% year over year. Economic growth in construction is described as cautious and uneven in 2026 – this environment still supports steady planning but demands tighter construction financial management.
• Construction industry jobs sit near 8.33 million, with about 11,000 nonresidential jobs added in June and a 4.7% unemployment rate, signaling easier labor availability for Carolinas contractors. Yet average hourly earnings rose about 4.3% year over year, and the construction industry needs 499,000 new workers by 2026 to keep pace with demand.
• For Carolinas construction firms and general contractors: manage your construction backlog and bids carefully, protect margins from volatile construction material prices, and focus on sectors actually funding work – especially data centers, infrastructure projects, and public work.

Why Carolinas Contractors Need a Mid-Year 2026 Economic Snapshot Now

This article is a July 2026 construction economic forecast written for project executives, estimators, CFOs, and owners running construction companies across North and South Carolina. The goal is to translate national mid-2026 data into regional, on-the-ground planning guidance for bidding, staffing, and margin management in the Carolinas construction market.

The central paradox is worth stating plainly: backlog and confidence surveys show contractors staying busy and optimistic, yet nonresidential construction spending – especially private work – has been sliding for months. That decline is partly masked by surging demand from large projects in data centers and digital infrastructure. Beneath that headline, segments like office, lodging, and traditional commercial are struggling.

The key trends we cover below include total construction spending, nonresidential construction spending, construction industry jobs, construction backlog, confidence indexes, and construction material prices. Each matters for day-to-day decision-making. This analysis builds on ABC Carolinas’ broader Construction Industry Outlook 2026: Key Trends and Expert Insights, framing it as a vantage point from a regional trade association working directly with commercial contractors across both states.

Headline Numbers: Spending Trends and Segment Winners & Losers

Total U.S. construction spending in May 2026 stood at roughly $2.21 trillion, basically flat month over month and down about 1.5% compared with May 2025, according to Census Bureau data. This signals a plateau rather than a sharp downturn – but the composition underneath tells a sharper story.

Private nonresidential spending – around $739 billion – is down about 6.6% year over year and has now declined for seven consecutive months, underscoring real softness outside a few hot niches. Put-in-place spending is projected to reach nearly $1.3 trillion in 2026 across all sectors, and the U.S. construction market is expected to approach $1.4 trillion in 2027, but growth is uneven. Non-residential construction grew 3.4% year-over-year in 2025, making the current deceleration notable. High borrowing costs are causing delays in commercial developments, reducing new project launches, and material costs have led to an 88.2% year-over-year increase in project abandonment – a sign that elevated costs are killing deals before they reach contractors.

The weakest segments nationally: manufacturing down near 22% year over year, lodging down about 11%, and commercial (retail and traditional office) down roughly 6%. These drops are visible in Carolinas RFP flow, with fewer speculative office and hospitality pursuits hitting the street. The bright side is public work: highway and street spending grew around 3% year over year, and public infrastructure spending helps offset downturns in private commercial markets. Infrastructure Investment and Jobs Act funding continues to support public infrastructure projects across the region. In the Carolinas specifically, transportation improvements, ports, utilities, and site-readiness work around industrial corridors remain active construction activity.

The planning implication: Carolinas firms should rebalance pipelines away from speculative commercial and toward public infrastructure, institutional, and owner-funded mission-critical work when shaping their outlook for the next 6–12 months.

The Data Center Effect: Concentrated Strength in a Slowing Market

Data center projects and digital infrastructure are the standout bright spots in an otherwise cooling private nonresidential market. Data centers were a leading sector in the construction industry for 2025, and data center starts could exceed $58 billion in 2025, with data centers projected to grow by 20% in 2026. Currently, 39 late-stage data center projects are tracked with a combined worth of $25.5 billion, according to the Dodge Construction Network and industry trackers.

This surge is driven by demand for AI, cloud, and hyperscale computing. Power demand from US data centers could grow fivefold by 2035, and AI data centers may increase power needs to 123 gigawatts by 2035. However, the boom is concentrated in specific regions and a narrow set of highly specialized trades – meaning data center expansion does not fully offset softness for firms focused on office, retail, or small commercial work in other sectors.

In the Carolinas, North Carolina had roughly 800 MW of data center capacity as of late 2025, and selected counties are attracting investments due to site-ready industrial parks, power availability, and fiber connectivity. Firms without direct access to data center work can still benefit indirectly via grid upgrades, substation work, water and cooling infrastructure, and adjacent industrial construction. Watch local planning boards and utility filings for early signals.

For ABC Carolinas members, the takeaway: prioritize building capabilities – workforce skills, safety programs, and preconstruction services – that align with mission-critical facilities, while maintaining realistic expectations about how much this niche can offset declines in broader commercial work.

Labor and Wages: More Workers Available, But Costs Still Climbing

U.S. construction employment reached about 8.33 million in June 2026, with roughly 11,000 jobs added that month – all in nonresidential, per labor statistics releases. This shapes the workforce picture for Carolinas contractors in important ways.

The construction unemployment rate sits near 4.7%, up about 1.3 percentage points from a year earlier, signaling that labor availability has improved and easing some of the acute labor shortages that defined 2023–2024. Yet persistent labor shortages in construction will require about 349,000 new workers in 2026, and a shortage of over two million skilled craft professionals is projected by 2028. Only 7% of potential job seekers consider construction careers, and nearly half – 41% – of construction workers are expected to retire by 2031, which means the industry could lose nearly $124 billion in output due to labor shortages if the pipeline doesn’t improve.

Average hourly earnings for construction workers are up around 4.3% year over year – a material cost factor for estimators. Construction wages increased 4.2% year-over-year as of August 2025, after wage growth cooled to 2.8% in late 2024, so upward pressure has reaccelerated. In the Carolinas, labor constraints remain tightest for electricians, mechanical trades, and data center specialists, though ABC Carolinas members report slightly easier fills for entry-level and mid-career roles through apprenticeship and craft education programs.

How contractors should respond:

• Expand apprenticeship and craft training pipelines even as markets loosen – the projected need for 499,000 new construction workers by 2026 isn’t going away.
• Use ABC Carolinas’ workforce development and safety training programs to find and retain qualified workers.
• Run scenario analyses on wage escalation, lock in key field leaders, and avoid underpricing labor in multi-year construction projects. Digital transformation helps firms overcome labor constraints by improving crew productivity, while AI-driven analytics enhance decision-making in construction projects and scheduling.

Backlog and Confidence: Busy Schedules, Softer Margins

ABC’s Construction Backlog Indicator stood at roughly 8.8 months nationally as of June 2026, with the South leading at about 10.3 months, reported by Associated Builders at ABC. For many Carolinas contractors, that places backlogs near or above pre-pandemic norms – a sign of cautious optimism.

The Construction Confidence Index shows sales expectations at 63.6 and staffing at 62.7, both well above the expansion threshold of 50. But profit-margin expectations register at just 52.4 – growth optimism paired with softer earnings expectations. Why does construction backlog remain historically strong despite weakening nonresidential construction spending? Long-duration infrastructure, data centers, and previously awarded megaprojects keep calendars full, even as new private deals take longer to close. Carolinas backlogs mirror or exceed national trends thanks to regional population growth, industrial recruitment, and ongoing public programs, but backlogs are increasingly concentrated in a narrower band of owners and project types.

Recommendations for trade contractors and general contractors:

• Stress-test your construction backlog under different start-date scenarios to protect cash flow.
• Avoid overcommitting to low-margin work just to feed the backlog.
• Use clearer go/no-go criteria for pursuits in segments facing declining demand.

The implication for the overall construction industry outlook: fundamentals support steady strategic planning for the second half of 2026 in the Carolinas, but margin discipline must take priority over top-line growth.

Materials, Tariffs, and Borrowing Costs: Protecting Margins in a Volatile Environment

Construction input prices dipped in June 2026 on lower energy costs, yet remain roughly 7.6% higher than a year earlier. Material cost inflation is projected at 4.5% to 5.5% in 2026, so the pressure hasn’t reversed. Material prices rose steadily from May through August 2025, and construction material costs reached a 40-year high of 25% to 30% in 2025 – a baseline the industry is still digesting.

The main cost drivers affecting construction material costs:

• Oil and diesel prices swing freight and asphalt costs; freight rates increased roughly 7% year-over-year due to tariffs.
• Trade policies and tariffs are increasing construction material costs. Tariffs on steel and aluminum reached up to 50%, and copper prices surged 26.3% year-to-date in 2025.
• Elevated interest rates raise borrowing costs for carrying inventory and financing construction projects, slowing investments in speculative development.

Waning megaproject activity might temporarily ease demand for some materials, but any slowdown can be offset quickly by new data center or infrastructure awards, keeping pricing choppy for Carolinas buyers. Policy uncertainty around future tariffs adds another layer of risk to supply chains.

Practical steps for Carolinas contractors:

• Use shorter material-quote validity periods and consider escalation clauses in contracts.
• Coordinate early with suppliers, and leverage ABC Carolinas education on procurement best practices to reduce risk management gaps.
• Tighten cash-flow forecasting with contingency lines in budgets, and keep project managers, estimators, and accounting teams aligned on construction financial management to catch margin erosion early.

Treat 2026 as a year for disciplined cost management on construction material prices rather than assuming the calmer pricing of prior years will return.

Practical Playbook for Carolinas Contractors: Turning Data into 2H 2026 Decisions

Here is how to translate the report above into a checklist for adjusting bids, managing the project mix, and planning workforce and capital needs for the rest of 2026 in North and South Carolina.

• Tighten bid discipline in softer segments – commercial, lodging, speculative office – and be selective, not desperate, in chasing data center and industrial work where competition is fierce.
• Align business development and preconstruction efforts with sectors where funding is clearest: public infrastructure, education, health care, data center and associated grid work. Avoid over-investing in speculative pursuits for future projects with uncertain financing.
• Keep building workforce pipelines through ABC Carolinas apprenticeships and construction training even as labor markets loosen. Cross-train crews for emerging segments like mission-critical, industrial, and transportation work. Technology investments are enhancing efficiency in the construction sector – digital tools boost productivity in construction firms, cloud-native digital twins are becoming standard in construction, and construction firms face pressure to adopt digital tools for competitiveness.
• Strengthen internal construction financial management: monitor job-level margin fade monthly, refine overhead recovery rates in estimates, and ensure project leaders understand how schedule slips and rework reduce profits in a flat-spending environment.

The overall construction industry outlook for the Carolinas: 2026’s second half looks stable but not booming. Firms that protect margins, control risk, and position around funded niches will be best placed going into 2027.

How ABC Carolinas Can Help Members Navigate the 2026 Construction Industry Outlook

The economic insights above connect directly to ABC Carolinas’ role as a regional trade association supporting commercial construction firms, general contractors, specialty contractors, and suppliers across the broader economy of North and South Carolina.

ABC Carolinas’ workforce development programs – apprenticeships, craft training, and safety management education – help members respond to a labor market where availability has improved, but skills and safety expectations remain high. Job openings for qualified workers still outpace the available pipeline, and only targeted training solves that gap.

Management education and economic briefings, including the broader construction industry outlook resources, give executives the tools to interpret historical data on backlog, confidence, and spending trends for their own businesses. On advocacy and regulatory affairs: while this analysis avoids political commentary, ABC Carolinas monitors government policies affecting tariffs, infrastructure funding, and workforce regulations so members can adapt early.

Use association events, roundtables, and peer groups to compare regional demand signals – data center interest, public-bid pipelines, and financing conditions – across metros and trades. For more insights, explore upcoming ABC Carolinas events and member resources.

In a mid-2026 environment defined by stable workloads, uneven sector health, and cost uncertainty, Carolinas contractors don’t have to navigate alone. ABC Carolinas exists to help members win work and deliver it ethically, safely, and profitably.

Frequently Asked Questions: Mid-2026 Construction Economic Forecast

How often should my company update its construction economic forecast in 2026?

In a relatively flat but shifting market, most Carolinas contractors should revisit their internal forecast at least quarterly – and more often if your backlog is shorter than six months. Updates should coincide with new data on awarded work, hit rates, labor availability, and any significant changes in material pricing or interest rates, rather than waiting for national reports alone. Tie these reviews to regular leadership meetings so estimators, project managers, and finance leaders align on which sectors to prioritize and which to pause. Construction dive into your own numbers matters more than broad national headlines.

What if we’re not in the data center market – where should we focus instead?

Many Carolinas firms can grow steadily by focusing on public infrastructure, K-12 and higher education, health care, municipal facilities, and industrial support work that benefits indirectly from tech and logistics growth. Contractors can specialize in scopes that data center and industrial owners need – sitework, concrete, utilities, or MEP components – even without being the prime on hyperscale facilities. Monitor local utility upgrades, substation projects, and industrial park expansions as leading indicators of where related construction activity and signs of new work will appear in your area.

How should we approach equipment purchases with rates still elevated?

Firms with strong, diversified backlog over 9–12 months may justify strategic equipment purchases, while those with shorter or more concentrated backlog should favor leasing or rentals to preserve cash flexibility. Compare total life-cycle costs – including financing, maintenance, and utilization rates – and stress-test payment assumptions under slower award scenarios. Discuss tax treatment and financing options with advisors, and use ABC Carolinas peer networks to benchmark practices against similar-sized builders and businesses amid rising costs.

What contract tools can help manage construction material price volatility?

Contractors can use escalation clauses tied to recognized indices, allowances for high-volatility items like steel and copper, and clear substitution provisions to share risk with owners and protect thin margins. Negotiate shorter price-lock periods with suppliers, and align contract language so schedule slippage doesn’t leave you fully exposed if prices spike mid-project. ABC Carolinas education and management resources can help members understand common clause structures and owner expectations across the region.

How can ABC Carolinas support our planning beyond this 2026 snapshot?

Beyond economic articles, ABC Carolinas offers ongoing management education, safety training, apprenticeship programs, and issue briefings that help firms adjust as market conditions change. Members gain access to a network of peers, suppliers, and advisors who share on-the-ground intelligence about project pipelines, labor conditions, and bidding practices across the Carolinas. Explore ABC Carolinas’ strategic planning resources and upcoming events to keep your strategy aligned with regional trends and challenges through the rest of 2026 and into 2027.