Texas Employment Forecast
December 18, 2020
Texas employment grew 4.0 percent annualized in November after increasing a slightly revised 10.9 percent in October. While jobs have increased since May, they are still down sharply from December 2019. The Texas Leading Index increased for the seventh consecutive month in November, 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 job growth will weaken further in December. The Texas Employment Forecast projects jobs will decline 5.3 percent this year (December/December). Based on the forecast, 680,800 jobs will be lost in the state this year, and employment in December 2020 will be 12.2 million (Chart 1).
“Texas job growth slowed in November as COVID-19 cases and hospitalizations increased sharply,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “Recent high-frequency data, such as the Texas Weekly Employment Estimate, suggest further slowing in December. Due to the recent surge in COVID-19, we expect a weak first quarter in 2021. However, as vaccines become more widely available, job growth should accelerate. While the Dallas Fed will release its 2021 Texas jobs forecast at an online event on January 29, currently we expect Texas job growth will be above trend but not fast enough to return to pre-COVID levels by year-end.”
The slowing of job growth was broad-based across private service and goods-producing sectors, with job growth in most broad industry classifications remaining positive, with the exception of mining, manufacturing, information services, health care and government. Leisure and hospitality and other services continued to recover strongly but remained well below pre-COVID levels.
The Texas unemployment rate increased from 6.9 percent in October to 8.1 percent in November, higher than the U.S. rate of 6.7 percent. The data suggest many individuals re-entered the labor market seeking jobs, as both the number of unemployed and the labor force increased strongly.
The Texas Leading Index increased for the seventh consecutive month in November (Chart 1), accelerating sharply from October’s pace. Seven of the eight components gave positive contributions to the index (Chart 2). Declines in initial claims for unemployment insurance, along with increases in the stock prices of Texas-based companies and helpwanted advertising led increases in the index. The Texas value of the dollar, the U.S. leading index, real oil prices and permits to drill oil and gas wells gave more moderately positive signals, while average weekly hours worked in manufacturing declined somewhat.
Next release: January 29, 2021
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/