Texas Employment Forecast (April 3)

Texas Employment Forecast

The Texas Employment Forecast indicates jobs will increase 1.9 percent in 2026, with an 80 percent confidence band of 1.1 to 2.7 percent. The forecast is based on an average of four models that includes projected U.S. gross domestic product, oil futures prices and the Texas and U.S. leading indexes. The forecast implies 278,400 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 2.3 percent in January, adding 27,000 jobs. Meanwhile, December employment growth was revised up to 2.2 percent.

"Texas employment growth strengthened notably in December and January, contributing to an increase in the employment forecast for 2026. However, our expectations are for Texas employment growth in 2026 to be more in line with the lower end of the confidence band at 1.1 percent given several headwinds. Declining immigration is constraining labor supply, higher productivity is suppressing labor demand, business activity captured by our Texas Business Outlook Surveys recently moderated, and geopolitical uncertainty is elevated. High oil prices, meanwhile, are expected to boost state economic activity only if they are sustained," said Luis Torres, Dallas Fed senior business economist.

"In January, job gains were observed across several sectors, led by construction, leisure and hospitality, education and healthcare services, and professional and business services. Meanwhile, there were job losses in government, financial services, manufacturing and information services. Among major Texas metros, Austin and San Antonio posted the fastest employment growth at 5.9 percent, followed by Dallas at 4.8 percent, El Paso at 4.4 percent, Houston at 4.1 percent and Fort Worth at 2.9 percent," he added.

The Texas Leading Index rose over the three months ending in January (Chart 2), with most components increasing. The index was boosted by increases in the help wanted index, the Texas stock index and average weekly hours, along with declines in new unemployment claims and the Texas value of the dollar. However, declines in the real oil price, well permits and the U.S. leading index contributed negatively to the index.

Next release: April 17

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.