Data Center Boom Drives Contractor Backlog Up as Skilled Labor Tightens
Contractor backlog is climbing again, and data centers are doing most of the lifting. Engineering News-Record reports that Associated Builders and Contractors’ Construction Backlog Indicator rose to 8.5 months in August, up from 8.0 in July, as a record one in six ABC members reported having data center work under contract.
Background
The August reading, based on an ABC member survey conducted Aug. 20 to Sept. 4, puts backlog back at its August 2025 level after a summer dip. The gains were not spread evenly. Infrastructure backlog jumped to 10 months from 8.8 in July, though it remains below last year’s 11.2 months. Commercial and institutional backlog rose to 8.5 months from 8.0. Heavy industrial backlog, by contrast, fell to 8.3 months from 9.2 in July and sits 2.7 months below its year-ago mark, according to ENR’s reporting on the ABC data.
The data center effect is the clearest story in the numbers. Contractors currently working on data centers reported a 9.9-month backlog versus 8.3 months for firms without such work. ABC Chief Economist Anirban Basu told ENR the shrinking gap between the two groups suggests more firms are landing data center contracts rather than a broad market rebound. A separate AGC-NCCER workforce survey cited by ENR found 28% of respondents had performed data center work in the prior year, with 58% of those firms reporting greater competition for skilled workers and 49% citing increased wage pressure.
Labor market indicators back up the tightening. Construction firms added 22,000 jobs in August and the industry’s unemployment rate fell to 3.1%, the lowest for any month in 26 years of available data, per an AGC analysis referenced by ENR. Yet ABC’s staffing confidence index fell to 59.5 from 62.3, and the share of contractors planning to cut staffing over the next six months rose to 12.3%, the highest since December.
Analysis
The split between rising backlog and falling staffing confidence is the real signal here. Owners are locking in data center capacity at a pace that’s outrunning the labor pool that builds it, while heavy industrial work cools enough that some firms are trimming crews even as overall demand looks healthy on paper. That’s not a contradiction, it’s a sorting process. Capital is concentrating in hyperscale and mission-critical work, and the general contractors who win that work are pulling skilled trades away from softer segments.
Basu’s read, that more firms are securing data center contracts rather than the market broadly improving, matters for how subcontractors should plan. This isn’t a rising tide. It’s a reallocation. Firms without a foothold on a hyperscale GC’s roster are competing for a shrinking slice of heavy industrial and standard commercial work, while data center-aligned firms are booking nearly two extra months of backlog and facing real wage pressure to staff it.
The 12.3% figure on planned staffing cuts is worth sitting with. It shows contractors are already anticipating softness outside data centers, even as job openings sit near a two-year high industry-wide. That combination, tightening in one lane and loosening in another, means skilled-trade pricing power will not be uniform. Electricians, mechanical crews, and E&I specialists tied to data center buildouts are in a seller’s market. Crews tied to heavy industrial projects may see the opposite.
What It Means for Subcontractors
- Electrical, mechanical, and E&I subcontractors should push now to requalify with GCs active in hyperscale data center work, since firms with that work on the books are carrying 9.9 months of backlog versus 8.3 months for everyone else.
- Lock skilled-trade labor rates and crew commitments before Q4, given that 58% of firms performing data center work already report greater competition for workers and 49% report rising wage pressure, per the AGC-NCCER survey cited by ENR.
- Heavy industrial subs should watch their own backlog closely: that segment fell to 8.3 months in August from 9.2 in July and sits 2.7 months below last year, a signal to diversify bid targets toward infrastructure, where backlog jumped to 10 months.
- Firms without data center exposure should prepare for tighter margins on staffing decisions, since 12.3% of ABC members now plan to cut staffing in the next six months, the highest share since December.
- Track the ABC Construction Confidence Index reading for staffing, which dropped to 59.5 in August from 62.3 in July, as an early indicator of where GCs expect to pull back hiring next.
