KEY POINTS
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Labor shortages and wage growth, material price increases, and surging fuel costs are raising costs and squeezing business margins across industries, including construction.
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Total monthly bankruptcies hit 2,054 in December 2025, well above the pre-COVID monthly average of roughly 1,900. The second half of 2025 averaged 2,167 bankruptcies per month, signaling that economic stress is being broadly felt across the economy.
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The faster increase in Chapter 11 filings compared to Chapter 7 suggests that businesses may be struggling specifically with the sustained high-interest-rate environment.
A Familiar Squeeze with a New Edge
The U.S. economy is generating work, but it’s also generating pressure. For construction firms and their suppliers, the list of cost headwinds has grown familiar. Persistent labor shortages, elevated material prices, and now a sharp uptick in fuel costs driven by the latest Middle East conflicts.
Individually, these challenges are manageable. Together, they create compounding margin pressures that can push firms from profitability into financial distress. And the data suggests this is already happening.
What the Bankruptcy Numbers Tell Us
Bankruptcy filings across all U.S. industries have risen meaningfully from their recent lows and are now running above pre-pandemic norms.
In 2022, total monthly bankruptcies bottomed out at roughly 900, artificially suppressed by federal pandemic-era support like PPP loans, enhanced unemployment benefits, and forbearance programs. These lifelines delayed failures that an otherwise typical economic environment would have produced.
Looking further back, the pre-COVID period of April 2018 through January 2020 offers a more reliable benchmark. During that stretch, monthly bankruptcies averaged slightly less than 1,900, reflecting an economy operating under typical conditions. One that saw steady GDP growth, moderate interest rates, and manageable input costs.
Fast forward to today, and the picture has shifted. December 2025 recorded 2,054 total bankruptcies, and the second-half 2025 average was 2,167 per month. Both figures exceed the pre-COVID baseline, indicating that economic stress is creeping into previously stable corners of the economy.
Why Chapter 11 Filings Are Outpacing Chapter 7
Among the two most common types of bankruptcy are Chapter 7 (liquidation) and Chapter 11 (reorganization). Recent trends reveal an important nuance: Chapter 11 filings have grown faster than Chapter 7 filings.
This distinction matters. Chapter 7 filing means a business has no reason to exist and thus should liquidate its assets. Chapter 11 filing, by contrast, often occurs due to debt-service stress. The business model is viable, but the existing capital structure is unsustainable. means a business is attempting to restructure its debts while continuing to operate.
The relative rise in Chapter 11 filings suggests that many firms are not failing due to a bad business model. Instead, they are struggling to sustain profitability amid an unsustainable debt structure, often rooted in elevated interest expenses that cannot be sustainably managed.
For construction, this trend is particularly relevant. The industry relies heavily on credit for equipment financing, bonding, and working capital. When interest rates rise, the cost of doing business rises with them, even when project pipelines remain healthy.
The Triple Squeeze: Labor, Materials, and Fuel
The bankruptcy trend reflects the convergence of three persistent cost pressures:
1. Labor. The construction workforce shortage is well-documented. The industry continues to compete for workers in a tight labor market, driving sustained wage growth. Construction wages reached $40.70 per hour in February, and average weekly hours have risen to 39.6, widening the gap over the broader private sector.
While higher wages are necessary to attract and retain talent, they directly increase project costs and compress margins, particularly for firms locked into fixed-price contracts.
Another thing to note is that the construction labor force aged 55+ is growing at nearly twice the pace of the 25-54 segment. This demographic shift could intensify labor shortages as older workers retire, leaving a gap that younger workers may not fill quickly enough.
2. Materials. Construction material prices rose 6.2% in 2025, the steepest annual increase since the post-COVID spike. Tariffs on steel, aluminum, and copper have added additional layers of cost that many firms cannot fully pass through to clients. Bid prices grew by just 2.7% over the same period, meaning contractors were already absorbing margin pressure before other cost drivers intensified.
3. Fuel. The latest Middle East conflicts have introduced a new and volatile cost variable. Diesel prices, which directly affect nearly every piece of heavy equipment on a jobsite and every truckload of materials delivered to one, have surged. A large excavator burns roughly 8 to 13 gallons of diesel per hour.
At elevated prices, an eight-hour shift on a single machine can run $400 to $500 in fuel alone. For civil contractors moving large volumes of aggregate, concrete, or steel, the impact flows through every line item on the job.
What Construction Firms Should Be Watching
Bankruptcy levels can serve as a useful gauge of the broader economy’s well-being. This is especially true if project owners and developers, or even firms along the construction supply chain, begin to struggle. When this happens, the symptoms can be manifold, including project cancellations, supply chain disruptions, tighter credit terms, and more stringent bonding requirements.
Construction firms themselves are, of course, not immune. The combination of labor costs growing faster than bid prices, material costs elevated by tariffs, and now a fuel spike driven by geopolitical conflict creates an environment in which even well-managed firms can find themselves squeezed.
The rise in Chapter 11 filings should prompt construction leaders to evaluate how exposed their own operations are to interest rate risk, whether through variable-rate equipment loans, revolving credit lines, or the cost of bonding.
The Bottom Line
At 2,167 per month in the second half of 2025, bankruptcy filings are not at crisis levels, but they are firmly above pre-COVID norms and trending in the wrong direction. The margin environment is tightening, and firms that do not actively manage their cost exposure and bid discipline risk finding themselves on the wrong side of these numbers.
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