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Q2 2026: Energy Shock Eases But Tariffs Sustain Pressure on Northern California Construction
The construction market saw temporary relief in June as oil prices retreated from Q1 highs, with input costs dropping 1.1% MoM. However, underlying pressures remain severe: diesel hit $5.13/gallon (up 58% YoY), aluminum surged 48.8%, and copper wire climbed 24.2%. The Iran conflict’s resumption threatens renewed volatility. Data center construction exceeded $50 billion annually—surpassing public transportation for the first time—while transformer lead times stretched to 160+ weeks.
California’s 439,000-worker shortage is compounded by immigration enforcement affecting 43% of its construction workforce— the nation’s highest share—while LA wildfire rebuilding (13,000+ homes destroyed, only 28 rebuilt after one year) competes for the same strained labor pool. Pacific region spending is projected at +1.7% (~$303B), led by healthcare, data centers, and power infrastructure, with Northern California positioned for data center and 2028 Olympics-related opportunities. Labor costs are up 21% since 2019; budget 4-6% annual wage escalation as baseline.
Read the full report here: XLC_Construction Cost Impacts_July 2026
