Research & Data
Texas Employment Forecast
June 17, 2016 · Forecast in PDF
Incorporating May employment growth of 0.4 percent and new leading index data into the Dallas Fed’s Texas employment forecast leads to a 2016 estimate of 1.3 percent growth (December/December), down from May’s forecast of 1.5 percent growth. The forecast suggests that 155,700 jobs will be added in the state this year and that employment in December 2016 will be 12.1 million (Chart 1).
A preliminary estimate suggests that the Dallas Fed’s Texas Leading Index declined in May after two months of strong increases, and the net three-month change was 2.04 percent (Chart 2).
“With the weak job growth in May and a dip in the leading index, the forecast suggests only a mild pickup from the 1.1 percent job growth so far this year,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “Much like 2015, employment growth remains strong along the I-35 corridor of Dallas, Austin and San Antonio but is soft in Houston, where jobs have declined modestly so far this year.”
Moderation in the leading index over the three months through May was centered on a sharp decline in help-wanted advertising. While rising oil prices are a positive sign for the state’s economy, declines in permits to drill oil and gas wells suggest continued weakness in the energy sector. Gains in stock prices of Texas-based companies and declines in initial claims for unemployment insurance were positive contributors to the Texas leading index.
Next release: July 22, 2016
The Dallas Fed 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 reported above is a point estimate with 80 percent confidence bands; in other words, the true forecast lies within the bands on Chart 1 with 80 percent probability.
The Dallas Fed Texas Employment Forecasting Model is based on a transfer function that utilizes past changes in state employment along with past changes in the Dallas Fed Texas Leading Index (TLI). Changes in the TLI have an impact on employment with a lead time of three months, and the effect dies out slowly over time. The regression coefficients on lagged changes in employment and the TLI are highly statistically significant, and the model as a whole has been accurate relative to other forecasters over the past two decades.
The forecasting model has been in use at the Dallas Fed since the early 1990s, and the employment forecast has been published in the Western Blue Chip Economic Forecast (WBCF) since 1994. Phillips and Lopez (2009) show that the model has been the most accurate in forecasting Texas job growth relative to other forecasters in the WBCF. In particular, the model had the lowest root mean squared error and was the closest to the actual the most times (eight out of the 14 years studied) out of the five forecasters that consistently participate in the survey.
For more details about the model and its performance, see “An Evaluation of Real-Time Forecasting Performance Across 10 Western U.S. States,” by Keith R. Phillips and Joaquin Lopez, Journal of Economic and Social Measurement, vol. 34, no. 2–3, December 2009.
For more information about the Texas Employment Forecast, contact Keith Phillips at firstname.lastname@example.org.