One aspect of domestic immigration enforcement that has received relatively little attention until recently is the effect of these raids on local economies. What is the impact of a large, local federal law enforcement presence on consumption?
To answer this question, we use publicly available data from the Deportation Data Project that documents that the intensity of the enforcement surge has varied sharply across states since January 2025. Using that variation, together with anonymized card-spending data from Affinity Solutions made available through Opportunity Insights, we estimate that the surge cut consumer spending by 1.7 percentage points in the states where community-based enforcement ramped up most sharply. The decline appears to track how visible enforcement has been to surrounding communities, rather than the total number of arrests.
Our findings indicate that at least two mechanisms are behind this decline. The first is visibility of enforcement. Community-based arrests which occur on the street or in local shops and public spaces, as opposed to arrests in jails and of those already in police custody, have skyrocketed since January 2025. This kind of arrest produces spending declines in surrounding communities; arrests made inside jails, which residents do not see, do not. Likewise, our research indicates that spending that does not require leaving the house has been unaffected by the surge. The second mechanism affecting local spending is labor supply: recent research finds that the surge has reduced employment.
The sectoral spending pattern looks different in states that voted for Harris in 2024 than in states that voted for Trump, but the surge has reduced economic activity in both. In Harris-voting states, the surge led to a decrease in total spending of 4.1 percentage points — larger than the national estimate, which averages across states with offsetting sectoral patterns. The most consistent, statistically significant decline from the enforcement surge has been concentrated inspectors associated with leisure and entertainment — spending at restaurants and hotels dropped by 2.3 percentage points. In Trump-voting states, the declines were concentrated in construction-adjacent and logistics sectors — home improvement spending fell 3.8 percentage points, and transportation and warehousing also contracted. These sectors rely heavily on immigrant workers; when immigration enforcement constrains that workforce, the sectors that depend on it contract.
Our findings are remarkably consistent with a spate of new and related literature that shows that enforcement surges have led to chilling effects on both foot traffic and labor supply in areas with high levels of enforcement. Hernandez (2026) and Wu and Li (2026) find that foot traffic declines to businesses near enforcement operations, a decline that persist for weeks. On the labor side, Cox and East (2026) find that immigrants living in areas with high levels of enforcement reduced their work hours, Escobari et al. (2026) find metro-level job losses that exceed the number of people actually arrested, and Aslim et al. (2026), show a reduction of immigrant labor in formal childcare settings. More surprisingly, this literature also consistently indicates these negative effects didn't just affect immigrants; the loss of immigrant workers has decreased employment among the native-born as well. As an economist would say, these two workforces appear to be complements, not substitutes. Or colloquially, if your immigrant co-worker is not available for work, you may be less productive and likely to work as well.
This analysis suggests a number of implications for affected businesses. For example, given that these raids by U.S. Immigration and Customs Enforcement have continued in recent months, albeit with a quieter profile, companies in targeted areas have a fiduciary duty to their investors to consider ways to mitigate the raids’ economic harms. For example, they may want to consider how to reduce immigration raids in their own communities, limiting both the human and economic costs in their communities. The spending declines we document are lost revenue to business owners. Firms have a clear financial stake in how enforcement is conducted, regardless of whatever positions they have about immigration policy itself.
Minneapolis offers an early look at the potential impact of corporate political responsibility. After the fatal shooting of Renee Good and Alex Pretti by ICE in January, more than 60 CEOs of Minnesota-based companies, including Target, Best Buy, 3M, General Mills, and UnitedHealth Group, signed an open letter calling for "an immediate de-escalation of tensions”. Another non-partisan approach, modeled by groups such as Integrity Matters, has been to help small business leaders tell the story of the impact of policy on their business. Going beyond concerns about immediate economic damage, the National Security Leaders for America, a group of former military and national security officials, drafted a set of standards which argues that domestic federal enforcement has the potential to damage democracy and erode public trust, and made recommendations to protect due process. A fascinating question for future research is the extent to which these statements contributed to ICE pulling out of Minneapolis. Although it is too early to assess their impact, such statements may serve as a model for companies seeking to protect the economy and the civic life of their communities from the damage caused by ICE enforcement.
Comments
Comment on this Insight