Texas Employment Forecast (May 1)

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 includes projected U.S. gross domestic product, oil futures prices and the Texas and U.S. leading indexes. The forecast implies 260,100 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 3.9 percent in March, adding 45,500 jobs. Meanwhile, February employment growth was revised slightly down to 0.2 percent.

"Texas employment growth accelerated in March, pushing year-to-date growth to 1.7 percent. However, given several headwinds, we expect 2026 growth to be close to the lower end of the forecast's confidence band, around 1.2 percent. Declining immigration is constraining labor supply, while higher productivity is suppressing labor demand. Additionally, our Texas Business Outlook Surveys suggest employment growth remains sluggish, with heightened geopolitical uncertainty weighing on hiring and capital expenditure decisions. Meanwhile, high oil prices are expected to boost state economic activity only if they are sustained," said Luis Torres, Dallas Fed senior business economist.

"Job gains in March were strongest in trade and transportation services, professional and business services, leisure and hospitality, and education and health services. Meanwhile, manufacturing, information services and other services registered mild job losses. All major Texas metros recorded strong job growth in March, led by Fort Worth at 5.2 percent, followed by Dallas at 4.8 percent, Houston at 4.5 percent, San Antonio at 4.3 percent, Austin at 3.7 percent and El Paso at 2.9 percent," he added.

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

Next release: May 22

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.