Texas Employment Forecast
July 16, 2021Texas employment grew at a 4.3 percent annualized rate in June after increasing by a revised 4.4 (previously 2.5) percent in May. The Texas Leading Index increased strongly for the third consecutive month. With the exception of a slight decline in March 2021, the index has increased every month since May 2020, suggesting continued expansion in the second half of the year.
Using a top-down model based on national forecasts, Texas COVID-19 hospitalizations and oil futures prices, we estimate that job growth will increase by 5.6 percent in 2021—up from last month’s estimate of 4.1 percent—with an 80 percent confidence band of 4.7 to 6.5 percent. Based on the forecast, 695,600 jobs will be added in the state this year, and employment in December 2021 will be 13.0 million (Chart 1).
“Healthy job growth in May and June and a stronger outlook for U.S. GDP growth in the second half of the year pushed up the forecast,” said Keith Phillips, Dallas Fed assistant vice president and senior economist. “Supply bottlenecks and labor constraints are likely to ease in the second half of the year. The forecast would be even stronger except for an increase in projected Texas COVID-19 hospitalizations in the third quarter, which may suppress growth somewhat.”
The Texas Leading Index continued to increase strongly in June (Chart 2). Gains in the index were fairly broad based across components and led by another sharp decline in initial claims for unemployment insurance. The other labor market indicators in the index were mixed, with help-wanted advertising increasing at a healthy pace but average weekly hours in manufacturing declining. The U.S. leading index and the two energy indicators, the inflation-adjusted oil price and permits to drill new wells, gave positive signals. The stock price of Texas-based companies and the Texas trade-weighted value of the dollar made slightly negative contributions.
Next release: August 20, 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/