For electric utilities planning construction projects for 2026, there is some positive, and some negative, news that may impact cost and timing.

According to a new report published by Associated General Contractors of America (AGC) and Sage Construction and Real Estate, construction contractors have “dampened” expectations for 2026, with the exceptions of surging demand for data centers and power facilities, amid broader worries about the direction of the economy.

The report, titled “Dampened Expectations: The 2026 Construction Hiring and Business Outlook,” noted that contractors report they have been impacted by tariffs, enhanced immigration enforcement, and challenges finding qualified workers.

The survey, conducted in November and December 2025, drew 951 respondents from construction firms across 49 states and the District of Columbia. Participating companies represented a broad range of revenue and employment sizes.

“While there are pockets of optimism in select private-sector markets, contractors’ overall sentiment has dampened notably compared to last year,” said Jeffrey Shoaf, AGC’s chief executive officer. “One reason for their lowered expectations is that contractors are increasingly worried about the broader economy, the possibility of a recession and the outlook for materials costs.”

Shoaf noted that the Outlook measures contractors’ expectations for different market segments via a net reading – the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink.

The highest net reading, 57 percent, is for data centers. Specifically, 65 percent of respondents expect the market for data center construction to increase, compared to just eight percent who expect it to shrink.

Contractors are also bullish about power projects, which recorded a net reading of 34 percent.

In addition to lowered expectations for other sectors, many contractors also report being impacted by new tariffs and enhanced immigration enforcement. Roughly 70 percent of firms report being affected by tariffs this year. Forty percent report responding to actual or proposed tariffs by raising bid prices, and 20 percent of firms added price-sharing adjustments or other terms to contracts. While 35 percent report passing most or all tariff-related costs on to project owners, 11 percent say they absorbed most or all tariff costs.

One-third of firms (33 percent) report having been affected by immigration enforcement actions in the past six months. Six percent report a jobsite or offsite was visited by immigration agents.

Eleven percent report workers left or failed to appear because of actual or rumored immigration actions, and 24 percent report subcontractors lost workers.

In addition, 63 percent of respondents report that an owner postponed or canceled a project in the past six months. When asked why, 37 percent cite a lack of funding or uncertainty about a funding source, whether federal, state, or private. Also, 34 percent say project financing was unavailable or too expensive. Furthermore, 23 percent of firms say increasing material or labor costs played a role.

Shoaf noted that respondents were asked to identify their biggest concerns for 2026. An economic slowdown or recession emerged as their most-often mentioned concern, cited by 62 percent of firms. The next three most cited concerns were workforce-related: 57 percent of respondents cited insufficient supply of workers or subcontractors, 56 percent selected rising direct labor costs (pay, benefits, employer taxes), and 53 percent identified worker quality.

Despite their broader concerns, most firms anticipate adding workers in 2026 to meet the needs of current and planned projects. A total of 63 percent of firms expect to add to their headcount, compared to only 15 percent who expect a decrease. However, more than four out of five firms report having a hard time filling hourly craft positions (82 percent) or salaried openings (80 percent), a higher proportion than at any point in the past three years.

Officials with Sage reported that construction firms are increasingly investing in technology to address productivity and labor challenges. Sixty-one percent of respondents say their firms are using artificial intelligence or plan to increase investment in it, up from 44 percent last year. AI is most commonly used for office and administrative functions, estimating, and preconstruction activities.

“AI is becoming an increasingly important tool for construction firms facing tighter labor markets and more complex projects,” said Julie Adams, senior vice president of construction and real-estate solutions at Sage. “Firms are using technology to improve efficiency, manage risk, and maintain productivity in a more uncertain environment.”

“With supportive infrastructure funding, workforce, trade and permitting policies in place, construction can continue to grow the economy, deliver essential projects and expand access to high-paying career opportunities,” Shoaf said.