Ken Simonson: construction shows strength in uncertain times - but how long will it last?

“I must say that of my 24 years with AGC, this is the one that I think has had the most rapid change and uncertainty,” says Ken Simonson, chief economist of US construction trade association the Associated General Contractors.

For Simonson, known for his weekly assessments of building activity by segment and region, materials costs and availability trends, which he has been putting together from the time of 9/11, through the Financial Crisis and the Covid pandemic, that’s saying something.

But, he says, this time it’s different.

The introduction, last month, of sweeping new US tariffs on goods imported from more than 90 countries, coupled with sharp hikes on duties on steel, aluminium and copper, means that investors are having to deal with new levels of uncertainty.

“Tariffs are having a lot of downstream effects, either holding up projects or leading to their cancellation,” he told the Scaffold & Access Industry Association (SAIA) 2025 Annual Convention in August.

“Uncertainty alone has caused a slowdown in commitments to new projects and many firms are wondering how much they will have to pay for the materials they’re using – not just how much they will have to pay for a new or expanded plant but how much their imported materials will go up and will that make them uncompetitive with other firms that may not be using imports or that may be bringing in materials from a country that has a lower tariff rate.

Economists in the firing line

Moreover, Simonson says, the upheaval comes at a time when economists themselves are coming under mounting political pressure over the figures they produce.

At the start of August US President Donald Trump fired Erika McEntarfer, the boss of US government statistics body, the Bureau of Labor Statistics hours after a 1 August report revised employment numbers for the previous month downwards. While revisions are common as more complete survey data comes in, the episode raised fears of political interference in official statistics.

Simonson, who served from 2009 to 2015 on the Bureau of Labor Statistics Data Users Advisor Committee, says that the numbers were the best available and described the body as “the gold standard of statistical agencies”

“It’s an unprecedented step – one that may wind up coming back to haunt him [Trump],” he tells delegates. “If the next number shows an increase over what we had before, people are really going to think the numbers have been tampered with.”

Simonson says that the BLS figures showed that total non-farm payroll employment increased by 1% over the last 12 months while the unemployment rate remained historically low at 4.2%. Meanwhile total construction activity has been growing faster than the overall economy with construction employment up 12% since early 2022—double the overall economy’s pace.

“If I were president, I wouldn’t be complaining about these numbers, let alone claiming they were rigged. But thank goodness, nobody has tried to make me president,” Simonson says.

US President, Donald Trump. Photo: The White House

Much of construction’s strength reflects the industry’s ability to attract workers by paying a wage premium. Average hourly earnings in construction are now 19% higher than in the private sector overall, up from 17% two decades ago. Wages are climbing at about 4–4.5% annually, according to both union settlements and surveys of salaried staff.

“Construction is paying more than other industries, and that’s how it has been able to keep hiring,” Simonson says.

Still, cracks are emerging. Hiring and job openings have slowed sharply, even as layoffs remain low. Employers appear reluctant to add staff now but are holding on to existing workers in the expectation that demand will recover later in the year.

And, after two years of flat or even declining input costs, materials prices are ticking upwards again. The producer price index for non-residential construction inputs rose 2.3% year-on-year in June—the steepest increase in two years—and 41% since before the pandemic. Steel prices, in particular, jumped after tariffs doubled to 50% in June. Gypsum and building materials have surged by more than 50% over the past five years.

These figures predate most of the latest tariffs, suggesting sharper rises are likely ahead. “We are headed for steeper price increases,” Simonson warns.

Beyond tariffs, fiscal and monetary policies are adding headwinds. The recently enacted “One Big Beautiful Bill Act,” which slashed taxes while raising deficits, is pushing up long-term interest rates. That raises borrowing costs for homeowners and developers alike and squeezes state and municipal bond-funded projects such as hospitals, schools and airports.

Cuts to renewable energy tax credits are also disrupting clean energy construction, with some projects being rushed to completion before subsidies expire. The medium-term effect, however, will likely be a slowdown in renewables investment.

Headwinds

Less support for renewables may also slow solar and electric vehicle-related projects, while harsh immigration and deportation actions are expected to “make construction labor shortages worse,” especially in states like Texas and California where more than 50 percent of craft workers are foreign born.

Despite the turbulence, economists are not yet calling a recession. GDP grew 3% in Q2 after contracting 0.5% in Q1, leaving the economy expanding modestly overall. Job growth is slowing but still positive.

Looking ahead, data centers stand out as the strongest driver of private demand, fuelled by the insatiable appetite for digital storage and artificial intelligence. These projects increasingly include their own power infrastructure, from solar arrays to experimental nuclear microreactors. Cold storage facilities and “last-mile” logistics hubs are also seeing sustained demand, even as traditional mega-warehouses struggle.

Overall, construction spending is more likely to decline than grow over the next 12 months Simonson said. But while firms face slower hiring, rising costs and policy uncertainty, they remain reluctant to cut staff outright—a sign that many still expect better times ahead.

“The industry is in a period of rapid change and uncertainty,” he concludes. “But despite the challenges, construction has continued to outpace much of the broader economy. The key question is whether that resilience can hold in the face of new tariffs, higher interest rates and slowing demand.”