Immigration Policies Take A Toll On The Texas Economy

Texas is where one in four ICE arrests have occurred across the United States in the first half of 2025 – more than any other state. That single number, from the Texas Tribune’s deep dive into Deportation Data Project records, sets the stage for what’s happening on the ground with the Texas economy, especially in construction. With one in three construction workers foreign-born, the labor shortage is evident in unfinished foundations, delayed deliveries, and stalled projects all over the state.

ICE recorded 138,000 arrests nationwide through late July, with Texas making up nearly a quarter. Daily arrests rose from 304 to 727, with 59 percent of detainees having no criminal convictions, up from 42 percent, per the same data. This shift reflects a focus on interior enforcement, raising questions about balancing security with economic impacts. After all, undocumented migrants contribute an estimated 2 to 3 percent to Texas GDP, while current enforcement drags productivity by about 1 percent, per Dallas Fed models.

Most ICE arrests were concentrated in Texas’s largest metro areas: Houston, Dallas, Bexar, and Travis counties, regions where construction and logistics drive about 15 percent of state GDP. Many detained individuals have lived in the United States for many years.

Routine workplace and street checks account for most arrests, primarily involving expired documents or traffic violations. And these actions are triggering labor shortages. Recently the Dallas Fed confirmed reduced job and output growth, with vacancies rising due to workforce absences and applicant declines. 

And ICE raids are also linked to hiring challenges. Another Dallas Fed survey shows 18 percent of firms already expect trouble retaining workers due to immigration changes.  Interior ICE arrests in Houston and Dallas, up 30 percent from June to November, are slowing job growth. Dallas Fed data show Texas employment growth now at 1.2-1.7 percent, down from prior trends, with 20 percent of businesses feeling enforcement pressure.

The “fear effect” is real: about 40 percent of affected firms report workers skipping shifts. CBP and ICE data show interior raids have hit local sectors like construction hardest, exacerbating a nationwide shortage of 439,000 workers and leading to reported hiring difficulties in Texas, where one in five small businesses have lost employees to deportations.

Texas firms are adapting to double ICE arrests since early 2025 by planning automation and cross-training , but only about 20 percent of affected firms report interest in temporary work-based visas like H-2B due to process hurdles. Fed projections are offering a dire warning: at 1 million deportations per year, U.S. GDP growth could drop 1.5 percentage points below benchmarks that were predicted by 2027. And Texas could face an even greater economic calamity with “higher costs and increased inflation growth” according to the Baker Institute at Rice University.

And that’s not all. The Baker Institute also projects a potential ten percent decline in state output if current enforcement levels persist. Without streamlined legal work pathways, the labor shortages seen today in places like Texas will likely harden into an even longer-term economic drag by 2027. 

Artem Kolisnichenko is a journalist and analyst specializing in immigration policy and judicial decisions, covering the American South and Southwest.