DALLAS, Texas - The federal government’s crackdown on undocumented immigrants is likely contributing to weak Texas job growth, according to a new report.
The report, titled “Immigration crackdown likely contributing to weak Texas job growth,” has been produced by four economists who work for the Federal Reserve Bank of Texas.
“Given the decline in immigration inflows, increase in arrests and removals of immigrants already here and the chilling effect, labor supply is clearly being affected,” the authors of the report write.
The report was penned by Isabel Brizuela, Emily Kerr, Pia Orrenius and Madeline Zavodny. Their analysis does not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System. Nonetheless, the report is posted on the Dallas Fed’s website.
Click here to read the analysis from the Federal Reserve Bank of Dallas.
The study shows that immigration into Texas from outside the country has slowed this year following federal policy changes. Findings from the Dallas Fed Texas Business Outlook Surveys suggest these changes “will negatively affect the ability to hire and retain foreign-born workers at about 20 percent of Texas businesses this year.”
Key points from the report include:
* By some estimates, Texas received at least 10 percent of the border immigration surge from 2021 to 2024—at least 550,000 extra immigrants—and firms grew more dependent on foreign-born workers.
* Among Dallas Fed survey respondents over the summer, 20 percent said immigration policy had hampered or is expected this year to hamper their ability to hire and retain foreign-born workers.
* Less immigration doesn’t necessarily mean higher or lower unemployment, but it will likely result in slower economic growth.
“Some—but likely not all—of the decline in labor supply will be offset with mechanization, technological innovation (including artificial intelligence) or offshoring,” the authors write. “Nevertheless, it bears noting that by 2031, all growth in the U.S. population is expected to come from immigration. Hence, when officials set immigration policy, they may also be setting the speed limit for the economy.”
The report concludes:
“Since the immigration enforcement changes began in mid-2024, U.S. and Texas job growth have fallen well below their respective long-run trends. Given the decline in immigration inflows, increase in arrests and removals of immigrants already here and the chilling effect, labor supply is clearly being affected.
“In the country as a whole, the labor force contracted and the participation rate declined from recent peaks earlier this year, in April. In Texas, labor force growth is at very low levels. Meanwhile, signs of weakening labor demand are harder to spot, particularly in Texas. The state unemployment rate is low, at 4.1 percent, job postings are holding steady, and wage growth remains healthy.
“With sharply lower immigration, break-even job growth shifts downward. Break-even job growth is the pace of job creation consistent with a stable unemployment rate. If job growth is below (above) the break-even rate, then the unemployment rate will rise (fall). When the immigration surge was at its peak, economists estimated that U.S. break-even job growth was around 250,000 jobs per month, a huge jump from the long-run break-even employment growth rate, estimated at 70,000 to 90,000 net new jobs per month. Current estimates of break-even employment growth are approaching 30,000 jobs. This compares with average U.S. job creation this year through August of roughly 75,000 jobs per month.
“Less immigration doesn’t necessarily mean higher or lower unemployment, but it will likely result in slower economic growth. The labor market will show this first in the form of less job growth. Lower GDP growth will eventually follow. The U.S.-born workforce cannot make up for reduced immigration due to demographic pressures, including an aging population and low birth rates.
“Some—but likely not all—of the decline in labor supply will be offset with mechanization, technological innovation (including artificial intelligence) or offshoring. Nevertheless, it bears noting that by 2031, all growth in the U.S. population is expected to come from immigration. Hence, when officials set immigration policy, they may also be setting the speed limit for the economy.”
