Construction Labor Is Now Inflating at 1.6 Times the Private Sector

The producer price index for inputs to new nonresidential construction rose 7.1 percent from July 2025 to July 2026, according to an Associated General Contractors of America analysis of federal data released August 17. Diesel climbed 44.2 percent, liquid asphalt 45.2 percent, aluminum mill shapes 40.5 percent, steel mill products 22.5 percent and copper and brass mill shapes 18.4 percent.

The headline number is 7.1 percent, but the number that should change your pro forma is 5.2 versus 3.2. Construction wages for production and nonsupervisory workers rose 5.2 percent year over year, the largest increase since January 2024, while the entire private sector rose 3.2 percent, the slowest in more than five years. Construction labor is inflating at roughly 1.6 times the broader rate, and the gap is widening from both directions at once.

Tariff relief, if it comes, addresses steel, aluminum, copper and the petroleum complex. It does nothing about the trades. That portion of the cost curve is structural - a demographic and pipeline problem no trade deal can reach.

The breadth is the second warning. Lumber and plywood posted a 9.9 percent gain, the largest since March 2022. Paving mixtures and blocks rose 6.6 percent, a three-year high, and construction plastics 5.0 percent, the most since January 2023. Cost pressure has migrated out of the tariffed categories into general inputs, and value engineering has fewer places left to hide.

For anyone holding a fixed-price GMP signed six or twelve months ago, this is a contractor-solvency question before it is a budget question. Subcontractor default risk rises with exactly this pattern of input acceleration.

Implications: Escalation assumptions built on a 3 to 4 percent blended rate are now roughly half of observed input inflation. Re-price contingency, shorten the gap between GMP and notice to proceed, and stress-test your subcontractors' balance sheets rather than just their bids.