Texas Employment Forecast (May 22)

Texas Employment Forecast

The Texas Employment Forecast indicates jobs will increase 1.8 percent in 2026, with an 80 percent confidence band of 1.2 to 2.4 percent. The forecast is 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 253,000 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 1.6 percent in April, adding 18,500 jobs. Meanwhile, March employment growth was revised down to 3.4 percent.

"Texas employment growth slowed slightly in April, pushing down year-to-date growth to 1.5 percent. The slower pace of job growth is more aligned with expectations that the increase in 2026 will be close to the lower end of the forecast's confidence band, around 1.2 percent. This is due to two primary headwinds: immigration constraining labor supply, and higher productivity suppressing labor demand in some sectors. Additionally, our Texas Business Outlook Surveys suggest heightened geopolitical uncertainty due to the Iran War is weighing on hiring and capital expenditure decisions. Meanwhile, high oil prices are still expected to provide a boost to state economic activity, but only to the extent they are sustained," said Luis Torres, Dallas Fed senior business economist.

"Job gains in April were strongest in professional and business services, followed by construction and trade and transportation services. However, leisure and hospitality, financial services and manufacturing registered the biggest job losses," he added.

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

Next release: June 19

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.