Texas Employment Forecast (Oct. 19)

Texas Employment Forecast

The Texas Employment Forecast projects jobs will increase 0.9 percent in 2026, with an 80 percent confidence band of 0.6 to 1.2 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 134,000 jobs will be added in the state this year, and employment in December 2026 will be 14.5 million (Chart 1).

Texas employment fell an annualized 1.6 percent in September, losing 18,900 jobs. Meanwhile, August employment growth was revised upward to 2.3 percent.

"Texas employment declined in September, slowing year-to-date job growth to 0.8 percent, well below the state's long-running average of 2 percent. The moderation in job growth is consistent with current labor supply constraints that partly result from sharply lower immigration. Employment declined in most sectors, while manufacturing remained a bright spot supported by oil and gas activity, export growth and construction related to artificial intelligence expansion," said Luis Torres, Dallas Fed senior business economist.

Job losses in September were led by government and construction followed by education and health services, trade and transportation services, financial services, leisure and hospitality, and oil and gas. Of the two sectors that added jobs, manufacturing posted the strongest gains followed by information services. Employment in other services remained unchanged.

The Texas Leading Index increased during the three months ending in September, with mixed contributions across its components (Chart 2). The index was boosted by increases in the help-wanted index and the U.S. leading index and by declines in new unemployment claims and the Texas value of the dollar. Meanwhile, decreases in average weekly hours, the Texas stock index, and the real oil price were drags on the index.

Next release: Nov. 20

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, respectively. 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.