Data Centers Are Carrying Construction Right Now, ABC Reports

Construction backlog rebounded in August, according to the Associated Builders and Contractors' latest member survey. The reading climbed to 8.5 months, up half a month from July and flat compared to a year ago.

The bounce is welcome. It's not a full recovery. Backlog is still running below where it sat for most of the last several months, and data centers remain a major support keeping it from falling further.

Roughly 1 in 6 ABC members is currently under contract on a data center project. That's the highest share ABC has ever recorded in this survey. That's not a trend anymore. That's a client list.

Contractors with data center work are sitting on 9.9 months of backlog, compared to 8.3 months for those without it. The gap narrowed in August. Chief Economist Anirban Basu was careful about the why, noting it looks less like a broader shift across the industry and more like contractors simply finding their way onto data center jobs specifically.

Size matters too. Only the largest contractors saw backlog decline in August. Year-over-year gains are concentrated among firms with less than $30 million in annual revenue.

ABC's Construction Confidence Index told a mixed story. Sales and profit margin expectations both improved in August. All three components, sales, margins, and staffing, remain above the growth threshold of 50.

Staffing didn't hold up as well. The share of contractors planning to cut staff over the next six months jumped to 12.3%, the highest since December.

Basu connected that to something else showing up in the survey: a sharp, unprompted increase in contractors flagging labor shortages on their own. With construction job openings sitting near a two-year high, that pairing is worth paying attention to.

“The share of contractors that intend to cut their staffing levels over the next six months rose to 12.3% in August, the most in any month since December,” said Basu. “At the same time, there was a sharp increase in the number of contractors who, unprompted, mentioned labor shortages in the survey. With construction job openings at a near two-year high, it appears that labor scarcity is reemerging as a major headwind for the industry.”

Data centers are doing a disproportionate share of the work keeping this backlog number afloat. When one segment is generating this much of the gain, a GC without a data center foothold is looking at a meaningfully different pipeline than one that has broken in.

The staffing pullback paired with rising labor shortage complaints isn't as contradictory as it sounds. Contractors can plan cuts and still struggle to find people at the same time. That pattern usually shows up when firms pull back in softer segments while still competing hard for skilled trades on the work that hasn't slowed down.

Smaller contractors posting year-over-year backlog gains while the largest firms saw an August dip is worth watching. It doesn't confirm where the best opportunities are, but it does suggest the sub-$30-million tier is holding up its end of the market better than the top of it right now.

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