Texas Employment Forecast
March 15, 2021
Texas employment grew 3.8 percent annualized in January after increasing a revised 6.2 percent in December. The Texas Leading Index increased for the ninth consecutive month, suggesting continued growth over the next three to six months.
Using a top-down model based on national forecasts, COVID-19 hospitalizations and oil futures prices, we estimate that Texas jobs will increase by 6.5 percent in 2021, with an 80 percent confidence band of 5.4 to 7.6 percent. Based on the forecast, 797,800 jobs will be added in the state this year, and employment in December 2021 will be 13.1 million (Chart 1). The forecast improved significantly from the 4.2 percent estimated in January.
The significant increase in the forecast came from improvements to all three of the core variables in the model: a sharp drop in the number of and forecast for Texas COVID-19 hospitalizations, an increase in U.S. GDP forecasts and an increase in oil prices.
With the release of the January data, the Texas Workforce Commission performed its annual benchmarking process on the data from October 2019 through September 2020.
“The Texas Workforce Commission revised down its December/December 2020 job growth estimate from -3.3 percent to -4.3 percent,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “The Dallas Fed’s early benchmark data that we used for the forecast in January showed 2020 job growth of -4.5 percent. Since this is very close to the annual benchmark data released on Friday, our forecast was little changed from the annual revision.”
The Texas unemployment rate fell from a revised 6.9 percent in December to 6.8 percent in January. The slight drop in the unemployment rate in Texas was partly due a decline in the labor force in January.
The Texas Leading Index increased for the ninth consecutive month in January (Chart 1), although it slowed sharply from December’s pace. Half of the eight components gave positive contributions to the index (Chart 2). Increases in help-wanted advertising, the oil price and the U.S. leading index and a decline in the Texas export-weighted value of the dollar contributed positively to the index. New claims for unemployment insurance and the stock price of Texas-based companies both gave slightly negative contributions, while declines in well permits and average weekly hours worked in manufacturing were more significant.
Next release: March 26, 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 is estimated based on expectations for U.S. GDP growth for 2021, an estimate of direct COVID-19 impacts from March to May 2020, projected hospitalizations in Texas for COVID-19, and expected prices of West Texas Intermediate crude oil based on the futures curve.
For additional details see dallasfed.org/research/forecast/