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Q1 2026
Construction Market Update
This quarterly spotlight provides an in-depth analysis of current trends, capital spend and industry outlook.
Three Takeaways
1.
Construction activity shows targeted strength, not broad acceleration.
2.
Supreme Court ruling and executive action on tariffs bring renewed uncertainty.
3.
The future of preconstruction is human-led, tech-enabled.
J. Brett Williams
President
Construction
Jump to
Construction
Outlook
The GDP-Jobs Disconnect
Tariffs in Flux
Trade Shifts
Bring in the Builders: Why Field Experience Belongs in Preconstruction & Estimating
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Building the Jobsite of the Future
Imagine projects where digital models drive field execution, where drones and augmented reality provide instant visibility, and where AI helps teams identify risk and improve decisions before work begins. Technology will not likely replace our people — it will amplify their experience and strengthen how we plan, build and deliver.
This is the jobsite of the future.
At Burns & McDonnell, we are leaning into this future. We are advancing digital delivery, expanding fabrication strategies and equipping our teams with connected tools that improve safety, productivity and predictability. Most importantly, we are integrating innovation thoughtfully to create real value for our clients and our craft professionals.
This year, our Construction Market Update will focus on the jobsite of the future. We begin with an article from Brett Poulos, our estimating and preconstruction director, highlighting how our preconstruction teams are not just adopting AI but also intentionally integrating it into workflows and decision-making to enhance estimating, risk identification and collaboration.
The future jobsite isn’t years away — it is taking shape today, and we are committed to leading the way.
Live Safer,
Brett
Labor and Tariff Highlights
18.7%
Increase in nonbuilding starts in 2025
11.6%
Average tariff rate on U.S. imports
66K
Construction jobs added in the last four months
Construction Outlook
Recent data from the construction industry shows improvements in several key metrics. However, these gains are unfolding amid broader economic concerns.
Signs of positive momentum include:
More projects are entering planning and breaking ground. According to Dodge, construction starts for nonresidential buildings increased 4.5% in 2025. Propelled by major projects in transportation and power plants, nonbuilding starts climbed 18.7%. The forward-looking Dodge Momentum Index, which tracks commercial and industrial projects entering planning, jumped in the second half of 2025, led by data centers.
The construction industry is adding jobs. Employment in construction rose by 66,000 jobs (0.8%) from October 2025-February 2026.
Industry sentiment is improving:
- FMI’s nonresidential construction index jumped from 47.9 in the fourth quarter of 2025 to 54.5 in the first quarter of 2026 (above 50 indicates expansion in the industry). Firms rated their own engineering and construction business at 67.1, a jump of more than 10 points from the previous quarter.
- Similarly, the ACEC Engineering Business Sentiment Survey is trending in the right direction, with the outlook for the engineering industry improving in the third and fourth quarters of 2025.
- ISM’s Manufacturing PMI Report, one of the top measures of economic health for the sector, showed growth in the U.S. manufacturing sector in January and February, after 26 months of contraction. The survey noted an increase in new orders and stronger backlogs, though respondents mentioned persistent challenges with tariffs, rising prices (especially metals), demand uncertainty and a shortage of electrical components.
Despite these positive indicators, weakness in the overall economy could stall momentum.
The GDP-Jobs Disconnect
One of the puzzles in 2025 was the combination of weak job growth with robust GDP growth. These two primary measures of the economy can only diverge for so long before either hiring picks up or GDP growth slows.
In the fourth quarter, GDP fell to an annual growth rate of 0.7%. The government shutdown and major cuts to the federal workforce hurt growth, but they weren’t the only causes of subpar numbers. Investment was also weak outside of the technology sector.
Newly revised jobs data revealed even slower employment growth than initially estimated in 2024 and almost none in 2025 (0.1%). As with GDP, cuts to the federal workforce depressed the overall numbers, but private hiring was slow as well, increasing just 0.3% in 2025. Over the past 70 years, private employment growth has never been this slow outside of a recession.
The weakness was not uniform across all sectors, but key industries are feeling the pressure. Manufacturing has been shedding jobs for two consecutive years, and the warehousing sector was hit particularly hard in 2025. While the utility sector has added 9,200 jobs since January 2025 (a 1.5% increase), its pace of growth has also slowed.
Tariffs in Flux
Any hopes for a more predictable trade environment in 2026 have officially been dashed.
After the Supreme Court invalidated tariffs that were applied under the International Emergency Economic Powers Act (IEEPA), the Trump administration implemented a new 10% rate globally under a different law, Section 122 of the Trade Act of 1974.
Compared to the IEEPA tariffs, the new 10% rate represents a decrease in tariffs for most major U.S. trading partners. Including all tariffs and adjusting for the mix of U.S. imports, the average tariff rate on U.S. imports is now 11.6%, compared to 15.3% prior to the Supreme Court ruling.
While the lower rate could help prices, the new tariffs can only be applied for up to 150 days, setting up another round of uncertainty between now and July, assuming the tariffs survive the legal challenges that are likely to come. The administration has already announced additional investigations to justify long-term tariffs under other sections of the Trade Act.
Trade Shifts
Increased tariffs were designed to decrease the U.S. trade deficit, but that hasn’t been the case so far. In a volatile year for trade, imports surged in the first few months of 2025 as businesses stockpiled ahead of the tariffs. Then, imports fell dramatically as tariffs were implemented in April. Over the full year, the trade deficit was virtually unchanged, with the deficit in goods actually increasing by 2%.
The overall numbers mask major shifts in where goods are coming from (discussed in our previous update) and which goods were exported and imported.
Tariffs clearly affected some trade movements:
- Exports of gold and precious metals soared as central banks and investors increasingly sold off U.S. assets and bought gold.
- Metal imports surged ahead of the tariffs, then dropped after.
- Pharmaceuticals saw a similar pattern, but imports were also boosted by demand for weight loss drugs.
- Imports of vehicles and auto parts were hit hard by U.S. tariffs, while auto exports suffered from Chinese tariffs.
Other factors were at play as well:
- Natural gas exports swelled with foreign demand for LNG.
- Increased deliveries of both commercial and military airplanes led to export growth for aircraft.
- Imports and exports of petroleum fell due to strong domestic production and global oversupply.
Investments in data centers and power drove up imports for generators, electric gear, computers and accessories, and telecom components. Exports of computers and accessories grew in 2025 as well.
Brett Poulos
Estimating and Preconstruction Director Construction
Bring in the Builders: Why Field Experience Belongs in Preconstruction & Estimating
The construction industry has long measured progress by what gets done in the field — steel set, concrete poured, pipe laid. But increasingly, what matters most is what gets done before the earth is turned. That shift is reshaping how the industry thinks about readiness; the jobsite of the future won’t be defined by the fastest crews alone but also by the smartest starts.
Preconstruction is a strategic function that lays the foundation of what comes next, not just in pricing and planning but in enabling the connected jobsite. When people, tools and data operate in sync, it’s because front-end work brings clarity to the chaos.
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