How the New Immigration Policies Could Affect Consumers Looking To Become Homeowners

Ahead of a variety of labor data releases from the Bureau of Labor Statistics, for this month’s labor analysis, we focus on the construction sector.

Why the construction sector? 

One of the campaign promises of the new Trump administration was to crack down on illegal immigration. Since taking office, the new administration has carried out more than 20 executive actions targeting the U.S. immigration system, which include a larger number of deportations. From a labor market perspective, removing undocumented workers will affect the labor supply - especially in the near term. However, each industry’s level of reliance on undocumented workers varies. Compared to other industries, the construction sector employs a higher share of foreign born population as opposed to native born population. The classification “foreign born” does not necessarily mean undocumented workers. However, scholars have estimated that the construction sector is likely more exposed to undocumented workers, using multiple sources of government statistics.  

According to the Morning Consult survey conducted between January 24-26, 2025 among registered voters, 43% of respondents said that deporting undocumented immigrants should be a “top priority” of the Trump administration, significantly below the 79% who believe that the top priority should be to bring down costs of goods and services. The U.S. consumer is still suffering from high prices and policies that would impact labor supply could add to the price strains that the U.S. consumer has been facing since the pandemic.

Why would these policies affect the U.S. consumer?

Housing costs remain a big burden for many in the Unites States and for those who want to be homeowners, homeownership has become increasingly out of reach. There are multiple factors affecting this phenomenon, as we highlighted in a report a few months ago. Prohibitively high interest rates, lower savings rate, high prices driven partially by persistent supply shortage are several factors to note.

In this research note, we focus on construction costs. Higher construction costs will ultimately lead to higher housing prices as companies aim to increase or the very least maintain their profitability.  Therefore, higher construction costs will be passed to buyers and will lead to higher home prices, which are already at record levels. From the builders’ perspective, higher costs may also be a deterrent to build, increasing the supply shortage observed over the years.

One large component of construction costs is materials and another one is labor. Material costs remain high and will likely see increases with additional tariffs imposed by the new administration. On the labor side of the equation, while the new administration’s policies could cause the construction labor pool to shrink in a short period of time, the latest data indicates that as opposed to material costs, construction labor costs will not be increasing from a peak.

The good news on the labor front

In his latest speech, after holding interest rates steady, the Federal Reserve chair Jerome Powell once again identified the labor market as “solid.” In aggregate terms, Morning Consult economists have also been describing the labor market as healthy, with certain caveats. It is healthy if one has a job. For those looking for a job, the labor market is in the deep freeze, visible in indicators such as longer term unemployment as the share of total unemployed.

The unemployment rate for the construction industry - although picking up inline with seasonal trends- is a touch below the average we observe since September 2020. Morning Consult’s unemployment index also shows a similar trend. There are some industries where unemployment is picking up or others such as food services where employment levels have not returned to pre-pandemic levels. For the construction industry, the number of employed is well above the pre-pandemic peak. 

The unemployment rate is a relatively broad indicator. However, in general terms, high unemployment and low number of employees would indicate a tight labor market. Ahead of any changes due to the new immigration policies, the construction sector remains at a relatively good position.

Wages and turnover:

Other labor indicators of tightness include wages and labor turnover. Compared to the height of the post pandemic recovery, compensation for construction workers as measured by the employment cost indexes has been trailing down. When the job market was hot and employers were competing for workers as they returned to the labor force post-pandemic, wages increased. Since then, wage growth has moderated to the levels observed in the 2017-2018 period.

Job openings in the sector also are declining, showcasing how the hot labor market is behind us. However, this can be reversed due to different dynamics: one option being: job openings and voluntary separations (quits rate) increasing. At this point, both of these indicators are trending down. 

How will this affect the U.S. consumer

While readily available data show that the construction sector (from a buyer/employer perspective) is beginning to encounter the changes to immigration policy from a place of leverage, sudden changes to the proportion of undocumented workers versus native born population could tip the leverage toward employees, especially those who are native born. According to the U.S. Census, employers are looking to increase their headcount in the next six months in the construction industry. When employees have the leverage, this typically translates to higher wages and benefits. While this is good news for the U.S. consumers who are employed in the construction sector, for others, who are looking to purchase homes, all else being equal, higher labor costs would ultimately mean higher prices.