Industry Spotlight: Construction in the US

The construction industry in the United States is a vast and dynamic sector, encompassing the design, building, and renovation of an extraordinary range of structures and infrastructure. Contractors in this space work on everything from residential homes and commercial buildings to public institutions, industrial facilities, and transportation networks. Services span new builds, expansions, modifications, routine maintenance, and emergency repairs, making the industry a critical driver of economic growth and societal development.

In recent years, high interest rates have placed pressure on the sector, raising the cost of capital and dampening construction activity. Rate cuts initiated in 2024 have started to ease some of these constraints, but the impact of the COVID-19 pandemic continues to shape the industry. The pandemic disrupted nonresidential construction, caused supply chain bottlenecks, and reduced demand for office space due to remote work trends, while simultaneously spurring residential building as low interest rates and increased home spending drove demand. Federal policy changes under the incoming Trump administration—such as potential deportations, tariffs, and the rollback of Biden-era policies—are expected to influence labor costs, materials pricing, and regulatory environments in ways that could have mixed impacts on the industry’s trajectory.

The construction industry has demonstrated resilience by capitalizing on growth opportunities in specific markets. Residential activity, bolstered during the pandemic, is now tempered by higher borrowing costs. Meanwhile, demand for warehouses initially surged with e-commerce expansion but has since slowed, while infrastructure, manufacturing, utilities, and data center construction have gained momentum thanks to major federal initiatives like the Infrastructure and Jobs Act, Inflation Reduction Act, and CHIPS and Science Act. The sector’s ability to pivot toward high-growth segments has helped stabilize performance during times of broader market volatility.

Financially, the industry remains massive in scale. In 2024, annual revenue reached $3.3 trillion, with growth projected to continue until 2029 before slowing to around 2.2%. The sector employs over 10 million workers, with employment growth projected at roughly 2% annually through 2029. There are approximately 4 million businesses operating in the space, with average profit margins holding steady at 6.6%, translating to about $56,967 in profit per business. Total industry profits from 2019 to 2024 amounted to $219.2 billion, underscoring the sector’s enduring importance to the national economy.

Despite its strengths, the industry faces persistent challenges. Rising material costs, driven by supply shocks and energy price increases, have tested profitability, though recent stabilization has eased bidding pressures. Skilled labor shortages remain a significant hurdle, exacerbated by wage inflation and declining union membership. However, an emerging interest in construction careers among younger workers provides a measure of optimism for replenishing the workforce.

Looking ahead, the construction industry’s prospects will hinge on its adaptability. Contractors who can manage costs, secure skilled labor, and align their capabilities with the fastest-growing market segments will be best positioned for success. Strategic planning, supported by data-driven insights, can help businesses navigate the industry’s cyclical nature while capitalizing on periods of expansion. Advisory firms like Blue Sky Exit Planning can assist contractors in benchmarking their performance and building strategies that ensure both resilience and long-term value.

For a deeper dive into the key takeaways and to see how your business compares to industry benchmarks, contact Joe at Joe@blueskyexitplanning.com.

Citation:Pigott, M. (2024). 23 Construction in the U.S. IBISWorld Industry Reports. https://my.ibisworld.com/

View Presentation