Texas Employment Forecast
November 20, 2020
Texas employment grew 10.6 percent annualized in October after increasing a revised 4.7 percent in September. Incorporating early benchmark revisions to second-quarter data, jobs are down 6.5 percent since December 2019. The Texas Leading Index increased for the sixth consecutive month in October, indicating continued positive growth over the next six months.
Using a top-down model based on national forecasts, COVID-19 infection rates and oil futures prices, we estimate that the jobs recovery in Texas will decelerate in the last two months of the year. The Texas Employment Forecast projects jobs will decline 5.6 percent this year (December/December). Based on the forecast, 721,700 jobs will be lost in the state this year, and employment in December 2020 will be 12.2 million (Chart 1).
“Although October saw a pickup in job growth, the Texas economy has begun to slow with the surging infection and hospitalization rates from COVID-19,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “As a result, we expect some pullback in the recovery through the end of the year as people are more cautious about face-to-face interactions, disproportionately affecting the service sector.”
Job gains were broad-based across private service and goods-producing sectors, with leisure and hospitality leading growth and continuing to add back jobs at rapid pace. Professional and business services growth surged and is now just 2.5 percent below that sector’s February peak. Mining jobs grew for a second consecutive month, suggesting some firming in energy activity. Government was the only major sector to see significant decline, with federal government declining sharply, likely due to a fall in census jobs.
The Dallas Fed’s early benchmark of second-quarter employment data indicates that employment losses were slightly more pronounced during the depths of the onset of COVID-19 in the spring. Total employment declined at a 26.3 percent annualized pace, compared to a previously estimated 22.5 percent. Downward revisions were particularly stark in mining, manufacturing, and leisure and hospitality, while health care services and trade, transportation and utilities saw some modest upward revision.
The Texas unemployment rate decreased from 8.3 percent in September to 6.9 percent in October, comparable to the U.S. rate. The number of unemployed and the labor force declined after surging in September.
The Texas Leading Index increased for the sixth consecutive month in October (Chart 1), accelerating from September’s pace. Four of the eight components gave positive contributions to the index, three declined and one was unchanged (Chart 2). Texas help-wanted advertising led increases in the index, followed by declines in Texas initial claims for unemployment insurance. The U.S. leading index and Texas trade-weighted value of the dollar gave more modestly positive signals, while declines in permits to drill new wells, stock prices of Texas companies, and average weekly hours worked in manufacturing were drags on the index.
Next release: December 18, 2020
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.
Due to the rapid onset of the COVID-19 pandemic, the forecasting model used in this release of the Dallas Fed Texas Employment Forecast differs from the model used historically. In this case, payroll employment for June to December, is estimated based on expectations for U.S. GDP growth for the remainder of 2020, an estimate of direct COVID-19 impacts in March, April, and July, and expected prices of West Texas Intermediate crude oil based on the futures curve.
For additional details see dallasfed.org/research/forecast/