WEST FARGO — North Dakota’s labor market is showing signs of easing in some sectors, but construction employers are likely to continue facing worker shortages, with federal immigration policy playing a critical role, according to the head of the Federal Reserve Bank of Minneapolis.
.jpg)
Speaking Thursday at the Midwest Economic Outlook Summit in West Fargo, Neel Kashkari said workforce availability remains uneven across industries, and recent federal policy changes have added pressure to construction labor supply.
Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, said Thursday that a change in federal immigration policy in the last year is one of the factors limiting the availability of construction workers.
The Trump administration in September last year imposed a $100,000 fee for new H-1B visa petitions. Previously fees had ranged from $2,000 to $5,000.
“We know that immigrants have filled a lot of construction jobs, historically,” Kashkari told attendees of the Midwest Economic Outlook Summit in West Fargo. “This is a big policy change.”
With fewer workers available to build apartments and single-family homes, the ripple effects could be felt across North Dakota’s housing market, Kashkari said.
With fewer workers to build apartment buildings and homes, less housing will be built and the construction costs will be higher, he said.
He emphasized that labor shortages directly influence both the pace of new development and overall affordability. In a state that has experienced steady economic expansion in energy, agriculture and technology, housing supply remains closely tied to workforce availability.
Kashkari noted that the big factors on construction and housing costs are labor and the cost of materials.
He said tariffs have driven up the cost of some goods, but that those prices should not continue to go up.
Beyond labor and materials, borrowing costs continue to shape buyer behavior and development feasibility.
A third factor in housing affordability is interest rates. The Federal Reserve’s main tool in regulating the economy — trying to keep inflation in check but avoid a recession — is setting interest rates.
The Fed will cut interest rates to spur the economy, which it did during the COVID-19 pandemic and the chaos the coronavirus caused on businesses. Kashkari said the rate cuts meant a flood of people buying or refinancing a home at about 3% interest.
When the pandemic waned and the economy accelerated, the Fed pushed interest rates back up as a way to control high inflation.
While the Fed has made some interest rate cuts, a current mortgage rate of around 6% interest makes a home more expensive.
“I hear a lot from families saying, ‘Hey, I can’t afford to sell my home because I’ve got a 3% mortgage, and I can’t trade that in for a 6% mortgage,’” Kashkari said. “So this does have a real effect on everybody.”
In addition to immigration and interest rates, Kashkari pointed to another emerging strain on skilled labor: the rapid expansion of artificial intelligence infrastructure.
Kashkari said another factor limiting the availability of construction workers is the boom in building data centers for artificial intelligence. The data centers require a lot of skilled labor, such as electricians and plumbers. Data center construction likely offers better wages than what those skilled workers can get in home construction or on service calls.
“This is life in a market economy,” Kashkari said. “If there’s a major investment in one sector of the economy, it’s going to draw resources from other sectors.”
The surge in data center construction across the Upper Midwest mirrors national trends, where utilities, developers and contractors are racing to meet AI-driven computing demand. In North Dakota, that competition can intensify shortages in residential and small commercial construction.
Kashkari spent some of his time in the Fargo area visiting with employers.
“What I heard was more of the traditional service workers, they’re more fully staffed in some of those sectors that are less skill specific. And that indicates that, to me, the overall labor market is softer than it was a couple years ago,” he said in an interview.
But for other sectors, like skilled labor and health care, the labor market remains highly competitive.
David Flynn, an economist and professor at the University of North Dakota, echoed similar concerns during a January regional conference hosted by the Minneapolis Fed.
He, too, said more workers were available for some sectors, but with any uptick in demand, it could easily tighten up.
“We don’t just have people laying around,” to fill jobs, he said.
North Dakota’s unemployment rate remains low at about 2.6%, underscoring the limited slack in the labor market.
Business leaders say immigration remains central to the state’s long-term economic outlook.
Arik Spencer, president and CEO of the Greater North Dakota Chamber, attributed some recent labor market loosening to employers exercising caution in hiring amid economic uncertainty.
He joined a summit panel discussion alongside Nigel Haarstad, the state demographer with the North Dakota Department of Commerce.
The U.S. Census Bureau says population growth in the United States has slowed significantly because of a decline in international immigration.
Haarstad, who recently projected that North Dakota has surpassed 800,000 residents for the first time, said international immigration has been a key driver of that growth — particularly in workforce-dependent industries like construction, manufacturing and health care.
Summit host Shannon Full of the Fargo Moorhead West Fargo Chamber of Commerce said that with border security strengthened, attention should now turn toward improving the legal immigration process to support economic needs.
Spencer said a frustration for many businesses is trying to figure out who is willing to work on immigration reform.
.jpg)
“We are a state of immigrants, and it’s important to remember that,” he said.
Economists note that North Dakota’s growth model — driven by agriculture, energy development and emerging technology investments — relies heavily on a stable and skilled labor force. Any sustained constraints on immigration could limit not only construction output but also long-term population expansion.
Housing availability remains a key factor in attracting new workers to the state. If construction slows and costs remain elevated, employers may face added challenges recruiting talent from outside the region.
While interest rate adjustments could gradually ease some affordability concerns, speakers at the summit suggested that workforce policy — particularly immigration reform — may ultimately play a more decisive role in shaping North Dakota’s economic trajectory in the coming years.
Originally reported by Jeff Beach in North Dakota Monitor.
.webp)
