Nonresidential Construction Is Shrinking Everywhere Except Data Centers
Two federal data releases came out three days apart at the start of September 2026, and read together they describe a market most contractors have not priced yet: less work than a year ago, concentrated into fewer sectors, and no labor left to staff it with.
By the numbers
Total construction spending in July 2026 was $2,157.6 billion at a seasonally adjusted annual rate, 0.5 percent below June and 3.8 percent below the July 2025 estimate of $2,242.6 billion. Census Bureau, released Sept. 1, 2026.
Private residential was $859.0 billion, down 1.3 percent from June. Private nonresidential was $755.2 billion, up 0.4 percent. Public was $543.4 billion, down 0.2 percent.
Private manufacturing construction fell to $167.8 billion from $214.4 billion in July 2025, a drop of about 21.7 percent year over year.
Private power construction rose to $161.5 billion, up about 6.5 percent year over year.
Associated Builders and Contractors found that with data centers stripped out, nonresidential spending fell for a second straight month, to its lowest level since September 2023.
BLS reported construction added 22,000 jobs in August 2026, released Sept. 4. AGC's analysis of that data put the construction unemployment rate at 3.1 percent, an all-time low.
One note on attribution, because it changes how you can use these figures in a bid narrative. The 22,000 job gain is BLS. The 3.1 percent industry unemployment rate and the all-time-low characterization come from AGC's analysis of BLS data, not from the Employment Situation release itself. Cite them that way.
The average is hiding the story
Private nonresidential spending was up 0.4 percent for the month, which reads like stability. It is not. ABC's chief economist Anirban Basu put it plainly: without data centers, nonresidential spending fell for the second straight month, hitting its lowest level since September 2023.
The manufacturing number is the clearest evidence. Private manufacturing construction ran at $214.4 billion in July 2025 and $167.8 billion in July 2026. That is roughly a fifth of a category gone in twelve months, and it is a category that absorbed enormous amounts of industrial, electrical and process capacity during the chip and battery buildout. Those crews did not evaporate. They went looking.
Meanwhile private power is up 6.5 percent year over year, and data center work is carrying the nonresidential line by itself. CBRE's H1 2026 North America report found new data center construction up nearly 25 percent while vacancy fell to an all-time low of 1.4 percent, with Atlanta passing Northern Virginia for the first time as the top market by total construction underway. Supply is rising fast and still cannot catch demand, because the binding constraint is power delivery rather than shell.
For a general contractor, the practical read is that your market position now depends heavily on whether you have a data center or power book of business. If you do not, you are competing for a shrinking pool with everyone else who does not.
Record-low craft unemployment is not the good news it sounds like
A 3.1 percent industry unemployment rate means there is effectively no bench. Every experienced hand who wants to work is working. Anyone you hire onto a schedule-driven project in the fourth quarter is coming off someone else's job, or coming into the trade new.
The August composition makes the point sharper. Specialty trade contractors led hiring, adding 11,200, split 7,800 nonresidential and 3,400 residential. Heavy and civil engineering added 4,400. Building contractors added 5,500 net, but that splits into 7,300 residential and negative 1,800 nonresidential. Nonresidential building contractors shed jobs in a month the industry gained them.
So the picture is not a rising tide. It is a reallocation, at speed, into the sectors that are still spending, in a labor market with nothing spare in it. That combination has a predictable safety signature, and it is not subtle: more workers in their first weeks on an unfamiliar site, more crews running slightly ahead of their experience, more supervision spread thinner than the headcount growth suggests, and more schedule pressure on the jobs doing the hiring.
First-period exposure is the well-documented part of that. New hires are disproportionately represented in serious injuries across construction, and the mechanism is not mystery: they do not yet know the site, the sequence, the equipment, or who to ask. Hiring twenty people onto a data center in November without scaling orientation, competent person coverage and daily planning is a decision about risk, whether or not anyone frames it that way.
What owners are going to do about it
The market tightening does not stay a labor story. It moves into procurement fast, because owners in a concentrated market can afford to be selective and data center clients in particular buy on schedule certainty.
Expect prequalification to do more of the sorting. EMR and TRIR thresholds are the blunt instruments, but the questionnaires increasingly ask for the things a lagging indicator cannot show: your written program set, competent person designations by discipline, subcontractor management procedure, orientation content for new hires, and incident investigation and corrective action records. A firm scaling headcount 30 percent without a corresponding answer to those questions is going to have a hard conversation.
The timing problem is that documentation is a lagging asset. An EMR reflects three prior policy years and does not respond to anything you do this quarter. A written program set can be built in weeks, but not during the week the prequal package is due. Contractors who are going to chase data center and power work in 2027 are better served building that now, in a slower quarter, than in a hurry when a package lands.
Frequently asked
Is construction spending actually down, or just data center growth slowing?
Down. Total construction spending in July 2026 was 3.8 percent below July 2025, and year-to-date spending was about 3.5 percent below the same period in 2025. Data centers are the reason the nonresidential line is not down further.
Why is employment rising if spending is falling?
They measure different things and they are shifting between sectors. Employment grew in specialty trade and heavy civil while nonresidential building contractors lost jobs, and dollar spending is influenced by material costs and project mix, not just labor hours. A reallocation can show job gains and spending declines at once.
What does a 3.1 percent industry unemployment rate mean practically?
That there is no available pool of experienced craft labor to draw from. Filling positions means recruiting off competitors or bringing in new entrants, and both raise the average inexperience on your crews.
Does any of this show up in prequalification?
Yes, and earlier than most contractors expect. Rate-based metrics lag by years, so owners screening in a concentrated market lean harder on program documentation, competent person coverage and investigation records, which are current and verifiable.
Key Takeaways
July 2026 construction spending was $2,157.6 billion SAAR, down 3.8 percent year over year, per the Census Bureau's Sept. 1 release.
Strip out data centers and nonresidential spending fell for a second straight month to its lowest level since September 2023, per ABC's analysis.
Private manufacturing construction is down about 21.7 percent year over year while private power is up about 6.5 percent. The work is concentrating.
Construction added 22,000 jobs in August per BLS, and AGC's analysis put industry unemployment at 3.1 percent, an all-time low. There is no bench.
More new hires on schedule-driven work is a safety exposure before it is a schedule exposure, and prequalification will read your documentation long before it reads your EMR.
Related reading
Build the documentation before the package lands
If you are staffing up on data center or power work and your safety coverage has not scaled with the headcount, that gap is visible to the next owner who prequalifies you. TriCore Safety builds safety plans and written programs, typically three weeks from kickoff to first draft in editable Word and PDF, and provides on-site safety leadership on active projects, usually mobilizing in 24 to 48 hours. Request a quote at tricoresafety.com.
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