Tennessee faces labor shortages amid construction surge
Tennessee construction is booming, but immigration enforcement is creating labor shortages for many firms.
Tennessee's construction industry is thriving, with a surge in building projects signaling strong economic growth across the state. However, a significant labor shortage threatens to slow down the momentum as immigration enforcement measures create staffing challenges for nearly half of the construction firms statewide.
The boom in construction is evident across Middle Tennessee, where new projects dominate the landscape. While the industry is optimistic about its future, a new survey from the Associated General Contractors of America on the 2026 Construction Industry Outlook reveals that 45% of construction firms in Tennessee are struggling with the impacts of immigration enforcement. According to the survey, 18% of contractors report that workers have failed to show up or left jobs due to actual or rumored immigration actions. Additionally, 32% of firms note that their subcontractors have lost workers because of these enforcement activities.
This labor shortage compounds an existing challenge in the industry. The survey also found that 88% of Tennessee construction companies are already struggling to hire hourly craft workers.
"So, it’s already stressing an already tight labor supply. The firms have always had difficulty hiring qualified workers. In Tennessee, specifically, what was reflected in the data is that immigration enforcement is negatively impacting them", said Marina Wilkins, a senior research analyst with the Associated General Contractors of America.
Wilkins also noted the negative ripple effects of the current environment, stating, "Any environment that creates a degree of fear mongering is, you know, not going to be conducive to any growth."
Despite these workforce challenges, optimism remains high among Tennessee construction companies. Forty-five percent of firms report having larger backlogs of projects compared to last year, and 64% plan to increase hiring in the near future. Growth is particularly strong in sectors such as data centers, water and sewer work, hospitals, and infrastructure projects like roads, bridges, and factories. For example, 67% of firms expect more data center projects, while water and sewer construction is up 50%, and hospital construction has grown by 38%.
According to Wilkins, this uptick in construction activity reflects broader regional growth. "It’s an early indicator as to whether or not there’s growth. You’re seeing an increase in construction spending or construction employment. You’re building facilities to facilitate the growth of a region", Wilkins explained.
While Tennessee’s construction industry remains resilient, three sectors - college buildings, office space, and retail stores - are experiencing slower growth. Nevertheless, the state’s overall success contrasts with national trends, where five sectors are currently in decline.
The timing of these challenges comes as Tennessee's economy continues to attract new businesses and residents, increasing the demand for infrastructure and buildings. However, stricter immigration enforcement measures planned by Republican legislators could exacerbate the labor shortage, potentially hindering the state’s ability to sustain its construction boom.
As 64% of construction firms plan to hire more workers, Tennessee’s building boom may face growing pains. These challenges underscore the delicate balance between economic growth and the policies that affect the state’s workforce.