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Texas Employment Forecast

October 21, 2016 · Forecast in PDFPDF

Incorporating September employment growth of 2.1 percent and new leading index data into the Texas employment forecast suggests jobs will grow 1.2 percent this year (December/December), unchanged from last month’s estimate. Based on the forecast, 142,300 jobs will be added in the state this year and employment in December 2016 will be 12.0 million (Chart 1).

The Dallas Fed’s Texas Leading Index generally held steady over the three months ending in September, with the index increasing a mild 0.33 percent (Chart 2).

“Jobs continue to grow after a decline in the first quarter of the year,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “The recent momentum in jobs and the slight gains in the Texas Leading Index suggest Texas will continue to grow at a pace of about 2.1 percent in the fourth quarter.”

The majority of the components of the Texas Leading Index increased over the three months ending in September. Average weekly hours worked in manufacturing were unchanged, while modestly negative signals came from declines in the real oil price and help-wanted advertising. However, positive indicators included gains in the U.S. leading index, stock prices of Texas companies and permits to drill oil and gas wells, along with declines in the value of the dollar and new claims for unemployment insurance.

“Overall, broad indicators of the Texas economy continue to point toward moderate growth,” said Phillips. “With the stabilization of the energy sector in the second and third quarters and continued growth in the service sectors, such as health care and leisure and hospitality, jobs in the Texas economy are likely to continue to grow at a moderate pace in the months ahead.”

Next release: November 18, 2016


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 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’s 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’s 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 has been the closest to the actual the most times (nine of the last 17 years) out of five forecasters that have consistently participated 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.

Contact Information

For more information about the Texas Employment Forecast, contact Keith Phillips at


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