Texas Employment Forecast (July 17)

Texas Employment Forecast

The Texas Employment Forecast indicates jobs will increase 2.0 percent in 2026, with an 80 percent confidence band of 1.5 to 2.5 percent. Based on an average of four models that include projected U.S. gross domestic product, oil futures prices and the Texas and U.S. leading indexes, the forecast implies 286,000 jobs will be added in the state this year, and employment in December 2026 will be 14.6 million (Chart 1).

Texas employment grew an annualized 3.5 percent in June, adding 42,100 jobs. Meanwhile, May employment growth was revised up to 1.3 percent.

"Texas employment growth accelerated in June, pushing year-to-date job growth to 1.9 percent-close to its long-run average of 2 percent. Texas job growth has been surprisingly strong in light of labor supply constraints. The data center buildout and relatively high oil prices continue to provide a boost to state economic activity and job growth," said Luis Torres, Dallas Fed senior business economist.

"Job gains in June were exceptionally strong in professional business services, driven by robust momentum in the staffing sector, as temporary help employment has been rising since March. Additionally, leisure and hospitality registered strong job gains, likely due to World Cup-related activity. Construction and trade and transportation also logged employment increases. In contrast, education and health services and government registered job losses. Among major Texas metros, Austin posted the fastest growth at 5.8 percent, followed by Fort Worth at 3.9 percent, Dallas at 3.7 percent and Houston at 2.7 percent, while San Antonio reported a decline of 3.1 percent," he added.

The Texas Leading Index was flat over the three months ending in June, with mixed contributions across components (Chart 2). The index was boosted by increases in the help-wanted index, the real oil price and well permits, along with decreases in new unemployment claims. Meanwhile, declines in average weekly hours, the Texas stock index and the U.S. leading index, along with increases in the Texas value of the dollar, contributed negatively to the overall index.

Next release: August 21

Methodology

The Dallas Fed's Texas Employment Forecast projects job growth for the calendar year and is estimated as the 12-month change in payroll employment from December to December.

The forecast incorporates early benchmarked Texas employment data and is based on the average of four models. Three models are vector autoregressions for which Texas payroll employment is regressed on the lags of West Texas Intermediate (WTI) oil prices, the U.S. leading index and the Texas Leading Index. The fourth model is an autoregressive distributed lag model with regression of payroll employment on lags of payroll employment, current and lagged values of U.S. GDP growth and WTI oil prices, and Texas COVID-19 hospitalizations through March 2023. Forecasts of Texas payroll employment from this model also use forecasts of U.S. GDP growth from Blue Chip Economic Indicators and WTI oil price futures as inputs. All models include four COVID-19 dummy variables (March-June 2020).

Learn more about the Texas Employment Forecast.