California Construction News staff writer
The Associated General Contractors (AGC) of California has released the results of its 2026 Optimism Survey, showing contractors across the state are entering the new year with measured confidence despite ongoing workforce and cost pressures.
The survey found overall demand expectations remain steady compared with last year, while projections for revenue growth, hiring and profitability have moderated slightly, reflecting what the association described as a cautiously optimistic outlook for California’s construction industry.
“This survey provides valuable insights from contractors across California,” said Peter Tateishi, chief executive officer of AGC of California. “It equips us to advocate for workforce and policy solutions that remove barriers to building and support the delivery of critical infrastructure projects. By understanding the challenges and opportunities contractors face, we can better align our efforts to drive innovation, improve efficiency, and ensure the construction industry continues to meet the state’s growing needs.”
Nearly 62% of respondents anticipate growth or a moderate increase in overall construction activity statewide in 2026, while another 17% expect activity to remain strong or expand further. In total, 81% of contractors expressed confidence in their own companies’ performance this year.
Most firms project slight to moderate revenue increases in 2026, signaling continued project activity even as growth expectations are tempered. About 52% plan to increase hiring to meet demand. Profit expectations also remain generally positive, with 54% forecasting net profit growth and another 25% expecting stable performance.
Outlook varies by market segment
Contractors in highway and transportation and utility and infrastructure markets reported steadier expectations tied to public-sector programs and essential infrastructure investment. Sixty-six percent of highway and transportation firms and 69% of utility and infrastructure firms expect strong or moderate activity in 2026.
Revenue expectations in infrastructure-heavy markets were more mixed, with 60% of highway and transportation firms and 48% of utility and infrastructure firms expecting revenue growth. Workforce demand remains elevated, with more than half of highway and transportation firms and 72% of utility and infrastructure firms planning to increase hiring.
Building-focused firms reported comparatively stronger activity expectations, with nearly 80% anticipating strong or moderate activity. Fifty-seven percent expect revenue growth and 69% plan to hire, reflecting cautious confidence influenced by private-market conditions.
Despite the positive outlook, contractors identified persistent challenges heading into 2026. Two-thirds of respondents cited demand for skilled labor as a key concern, underscoring the need for stronger workforce pipeline development. Regulatory compliance was cited by 58% of firms, while 45% pointed to rising wages and employee benefits as a pressure on margins. One-quarter of respondents specifically identified workforce pipeline development as a priority.
Tateishi said workforce issues remain central as contractors prepare for steady work in the year ahead.
“That’s why our workforce development initiatives are focused on building a stronger, more reliable talent pipeline for California’s construction industry,” he said.
The findings suggest the industry is positioning for continued demand in 2026 while navigating labor shortages, regulatory hurdles and cost pressures.
