Construction activity across the Upper Midwest continued to weaken this spring, with most contractors reporting lower workloads and ongoing uncertainty, according to a new survey from the Federal Reserve Bank of Minneapolis.
The findings show a region under pressure, even as industrial projects, especially data centers, continue to provide limited but steady momentum.
Overall Construction Activity Declines
The survey from the Federal Reserve Bank of Minneapolis found that 54% of construction firms in the Twin Cities region reported lower activity compared to a year earlier, while only 23% reported growth.
Contractors described the current environment as “stop and go,” with many projects delayed, paused, or reconsidered due to economic uncertainty and shifting demand.
The survey covered 204 firms across the Fed’s Ninth District, which includes Minnesota, Montana, North Dakota, South Dakota, northwestern Wisconsin, and Michigan’s Upper Peninsula.
Residential and Commercial Work See the Sharpest Drop
Residential and commercial construction experienced the steepest declines, dragging overall activity lower across the region.
Survey respondents pointed to:
- Reduced project pipelines
- Increased competition for fewer available jobs
- Delayed investment decisions from project owners
According to regional outreach director Erick Garcia Luna, many contractors are facing a more cautious market where securing new work has become increasingly difficult.
Industrial and Data Center Construction Provides Stability
Despite broader weakness, industrial construction continues to hold up.
Investment in data centers and related infrastructure has become a key stabilizing force, helping offset declines in other sectors.
As noted in the survey commentary, industrial activity remains one of the few consistent sources of growth in both the region and the broader U.S. construction market.
Some areas, particularly North Dakota, also benefited from infrastructure spending and data center development, standing out as an exception within the district.
Labor Shortages and Rising Costs Still Pressure Firms
Even as overall demand slows, contractors continue to struggle with persistent labor shortages.
Industry respondents reported that:
- Finding skilled labor remains a major challenge
- Rising material and transportation costs are squeezing margins
- Many firms are unable to fully pass increased costs to clients
Smaller and mid-sized contractors appear to be most affected, while larger firms reported relatively more stability or modest growth.
Uncertainty Expected to Continue
Looking ahead, contractors expressed cautious optimism that conditions may stabilize over the next six months. However, expectations remain muted due to ongoing pressure on pricing, project backlogs, and margins.
Regulatory uncertainty, tariffs, and cost inflation continue to weigh on investment decisions, contributing to a slower and more competitive bidding environment.
Despite these challenges, industrial and infrastructure-related construction remains the clearest source of resilience in an otherwise cooling regional market.
