Economic Report: Construction Industry Approaches 2025 with Cautious Optimism

By Robb Kahl, Construction Business Group

The U.S. construction economy has experienced record growth in recent years but as expected, did show signs of slowing in 2024 due to economic uncertainty marked by the battle against inflation, rising interest rates, and a decrease in both consumer and business confidence. Nationally, nonresidential construction spending increased by 5% over 2023 (lower than the previous years) led by growth in data centers, manufacturing, transportation, and power/utility projects.

The industry is cautiously optimistic about the 2025 economic forecasts that predict moderate economic growth, supported by federal infrastructure investments, the demand for sustainable and digital infrastructure, and a reduction in regulations that could streamline permitting and allow projects to start quickly. Nonresidential building activity is projected to rise by 8%, due to significant investments in manufacturing, data centers and infrastructure.

Provided federal investments and incentives (such as the Inflation Reduction Act (IRA), Infrastructure Investment and Jobs Act (IIJA) and CHIPS Act) remain intact after the new administration takes office in January 2025, Wisconsin’s construction industry is expected to see ongoing opportunities in transportation infrastructure, water line replacement, fiber optic construction, renewable energy, energy storage, conversion of coal power plants to natural gas, and technology-driven projects like data centers. Wisconsin will also benefit from nearly $17 million in federal funds aimed at expanding the EV charging network – again assuming these laws and appropriations remain in place.

Throughout the COVID pandemic, the construction industry faced tight margins due to elevated material costs and supply chain disruptions, which increased project costs and delayed projects. Excluding copper, brass and steel mill products, and diesel fuel, construction material prices were not as volatile in 2024, resulting in stabilization of bid prices. There is some concern that the incoming administration’s change in approach to tariffs could have a negative impact on the cost of construction materials.

Workforce remains one of the most significant challenges for the construction industry with more than 90% of contractors reporting the need to hire both skilled trade and office positions. U.S. nonresidential construction employment increased by 3.7%, a modest increase compared to prior YoY of 11%. Wisconsin’s construction employment numbers were almost exactly the same as the national average, coming in at 3.6%. Contractors remain eager to hire employees but find it difficult to hire because of lack of qualified applicants and new hires that fail to show up or quit soon after starting. The construction industry is a crucial contributor to Wisconsin’s economy. We need state and federal policymakers to continue to advocate for existing legislation and maintain appropriations to provide more funding through federal programs, such as the IIJA, to improve roads and bridges. Construction Business Group’s wish list for 2025 includes:

• Ongoing statewide support for registered apprenticeship programs, which provide family-sustaining wages for Wisconsin residents and align with federal incentives tied to labor standards.
• Streamlining environmental review processes without compromising sustainability standards, ensuring timely completion of projects.
• Enacting policies favoring local hiring for public projects, which keeps economic benefits within Wisconsin and maximizes job creation.
• Incentivizing labor and prevailing wage agreements to enhance job quality and worker retention in construction.

Construction Business Group is prepared to work with our industry partners and elected officials in 2025 to enhance the impact that the construction industry has on the state, private industry, and individuals. Let Us Build Wisconsin Together.

Kahl is the executive director of Construction Business Group | The Construction Business Group works to promote and protect the construction industry by ensuring fair contracting laws are followed on public construction projects. CBG works cooperatively with contractors, employees, and public entities by educating them on fair contracting laws; monitors projects for fair contracting compliance; and aids to resolve compliance issues.