Dallas Fed publishes third ‘At the Heart of Texas’ edition covering pandemic recovery, AI boom

News Releases

February 23, 2026

DALLAS-The Federal Reserve Bank of Dallas has released the third edition of its "At the Heart of Texas " publication, providing detailed economic profiles of the state's largest metropolitan areas.

The analysis shows why Texas was one of the fastest states to rebound from the pandemic. Dallas Fed researchers mapped industry growth in 12 metros from 2016 through 2023 to measure how they contributed to economic development. The report also covers the current AI boom propelling data center expansion and investment across the state.

"Texas' large cities provide an important growth advantage in addition to the state's other favorable economic factors," the authors wrote in the report. "It is no surprise that both employment and output typically grow faster in Texas than in the nation, and the recovery following the pandemic was no different."

Findings from key metros include:

• Dallas−Plano−Irving: Dallas is the state's top migrant destination. The metro's finance, insurance, transportation and e-commerce clusters are expected to continue expanding following an earlier national consolidation that increased their local concentration.
• Houston−Pasadena−The Woodlands: During the pandemic, unemployment rose in Houston, and the subsequent economic rebound lagged other metros in the state because of the energy sector's protracted recovery.
• San Antonio−New Braunfels: The area's diversified economy-particularly its business and financial services firms, tourism industry, military installations and medical research complex-continue to provide economic stability. While the area has attracted blue collar industries such as manufacturing, difficulties attracting skilled workers makes growing high-wage industries more challenging, especially as the metro encounters competition for educated workers from neighboring Austin.
• El Paso: Robust manufacturing activity in Ciudad Juárez boosts El Paso's service sector. However, moderating U.S. auto demand combined with uncertainty about tariffs and cross-border trade is slowing economic activity. In addition, Mexican peso weakness and slower migration could temper retail sales north of the Rio Grande.
• Austin-Round Rock-San Marcos: Businesses relocating operations from outside Texas have paced the metro's development, as new arrivals sought to benefit from traditionally reasonable property and living costs. Technology and professional services firms have figured prominently in Austin's recent growth.
• Fort Worth−Arlington−Grapevine: Fort Worth's blue-collar workforce provides a ready labor supply for the energy, manufacturing and construction sectors, but an inflow of finance, aerospace and services firms marks a shift toward attracting more white-collar workers.
• McAllen−Edinburg−Mission: While poverty remains high and education relatively low, both metrics are improving, bettering the area's ability to attract higher-paying industries. The University of Texas-Rio Grande Valley has improved access to higher education, closing workforce gaps.
• Midland−Odessa: Midland has sought diversification to lessen its reliance on traditional energy as the region's economic driver. A growing distribution and e-commerce cluster, abundant clean energy resources and the Midland International Air & Space Port all present opportunities for the metro to broaden its economic base. The area is becoming a data center hub because of proximity to abundant energy and growing power sources.
• Amarillo: The population is less diverse than that of the state, but the region has a strong set of core industries. Tight labor markets, outmigration of younger workers and low population growth limit near-term growth prospects.
• Beaumont−Port Arthur: Population has declined modestly since peaking in 2017, likely due to lackluster job growth from 2015 through 2021-a result of natural disasters and the pandemic, as well as the winding down of several massive, labor-intensive construction projects.
• Lubbock: A large student population helps explain the area's relatively low median household income and disproportionate population shares of 15-24-year-olds and college degree holders relative to the overall state. The South Plains metro has struggled to retain its young people, including new college graduates.
• Tyler−Longview: The area has been a manufacturing hub with an energy underpinning. A growing health care sector has led diversification efforts. Proximity to Interstate 20 has supported logistics and retailing in the area.

• -30-

  Media contact:
  Jon Prior
  Federal Reserve Bank of Dallas
  Phone: 214-922-6857
  Email: [email protected]