Key Takeaways:
- Construction unemployment stayed below 10% in every U.S. state in June, with a national non-seasonally adjusted rate of 4.7% and seasonally adjusted employment at roughly 8.3 million workers.
- State-level rates ranged from 1.4% in Alaska to 9.9% in Connecticut, with Wyoming, New Hampshire, New Jersey and Rhode Island also among the extremes.
- Rising energy prices, insurance premiums and tariffs on steel and aluminum are compounding labor pressure and suppressing new construction starts.
- Contractors can manage risk by separating labor and material costs in bids, using escalation clauses, pre-buying critical-path materials and partnering with apprenticeship programs.
Construction Labor Stays Tight in Every U.S. State
Construction unemployment held below 10% in every U.S. state in June, confirming a labor market that hasn’t loosened despite rising costs across the board. The national non-seasonally adjusted construction unemployment rate stood at 4.7%, according to a state-by-state analysis from Associated Builders and Contractors. Seasonally adjusted construction employment reached about 8.3 million workers, roughly 9.5% above the industry’s pre-pandemic peak.
State-level conditions vary, but the directional signal is the same: labor is scarce. Alaska recorded the lowest construction unemployment rate at 1.4%, followed by Wyoming at 1.6% and New Hampshire at 1.9%. Near-zero unemployment in those states forces contractors to schedule weeks in advance, lean on overtime, or pull crews from neighboring markets. Connecticut posted the highest rate at 9.9%, with New Jersey at 8.9% and Rhode Island at 8.5%. Even those figures stayed under 10%, indicating some available capacity without pointing to a broad slowdown.
For project teams, tight labor translates directly into firmer wages, compressed bid windows, longer lead times, and more scrutiny on budgets before award.
What’s Driving Costs Up Alongside Labor?
Input costs are rising on multiple fronts, compounding the pressure that a tight labor market already creates. Industry economists cite higher energy prices, elevated interest rates, elevated insurance premiums and tariffs on key building materials as the leading drivers.
“Overall, energy prices are significantly higher than a year ago, which is having a negative impact on the construction industry,” said Bernard Markstein, president and chief economist of Markstein Advisors, who conducted the ABC analysis. “The imposition of tariffs, both in place and proposed, on building materials is creating an additional headache for the industry, further reducing willingness to undertake new construction projects and driving up the cost of many current projects.”
Diesel and fuel volatility hits mobility and equipment costs. Rate-sensitive financing raises the bar for new starts. Insurance renewals have climbed across multiple lines, adding overhead before any work begins. Tariffs on steel, aluminum and other materials have added uncertainty to procurement and bid strategy, making price-protection language and shorter proposal validity windows increasingly standard practice.
How Should Contractors and Owners Respond?
Project teams that build contingency into budgets early are better positioned than those that don’t. Owners should ask bidders to separate labor and material costs so risk is easier to evaluate, explore phased starts to spread exposure across milestones and align procurement timelines with lender approvals to avoid rate creep during long preconstruction windows.
In low-unemployment states like Alaska, Wyoming and New Hampshire, factor in premium pay for overtime or travel and consider early award to secure crews before peak season. In markets with more slack, such as Connecticut, New Jersey and Rhode Island, competitive pricing may be available, but don’t assume material costs will follow without contingency.
Contractors recruiting in higher-unemployment states can fill positions faster and at lower premiums, then deploy traveling crews or satellite operations to service adjacent markets. Partnerships with trade schools, apprenticeship programs and workforce boards are producing measurable results for hard-to-find trades. On the contract side, pre-buying critical-path materials, inserting escalation clauses and indexing materials where owners accept it are now standard risk management on a wider range of project scopes.
Three variables will determine how the second half of the year plays out: energy prices, borrowing costs and material tariffs. Relief in any one of those could unlock shelved projects and tighten labor further. A renewed spike would push more owners toward value engineering or delayed starts. Either way, disciplined cost indexing, transparent communication on lead times and tight cash flow management will reduce friction from award through execution.
(Note: AI assisted in summarizing the key points for this story.)