Texas Employment Forecast (Sept. 18)

Texas Employment Forecast

The Texas Employment Forecast indicates jobs will increase 1.2 percent in 2026, with an 80 percent confidence band of 0.8 to 1.6 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 173,600 jobs will be added in the state this year, and employment in December 2026 will be 14.5 million (Chart 1).

Texas employment rose an annualized 1.6 percent in August, gaining 18,500 jobs. Meanwhile, July employment growth remained unchanged at -0.1 percent.

"Texas employment increased in August, bringing year-to-date job growth to 1.0 percent-below the state's long-run average of 2 percent. First-quarter benchmark revisions lowered the state's year-to-date employment growth to a pace more consistent with labor supply constraints," said Luis Torres, Dallas Fed senior business economist.

Job gains in August were broad-based, led by professional and business services, construction, government, manufacturing, and leisure and hospitality. Financial services, trade and transportation services, and education and health services also added jobs. Oil and gas jobs were unchanged, while other services and information services registered job losses.

The Texas Leading Index dipped during the three months ending in August, with mixed contributions across its components (Chart 2). The index was pushed down by declines in the real oil price, average weekly hours and the Texas Stock Index. Meanwhile, decreases in initial unemployment claims and the value of the dollar, along with increases in well permits and the U.S. Leading Index, contributed positively to the overall index. The help-wanted index remained unchanged.

Next release: Oct. 16

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 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.