Texas Employment Forecast
October 22, 2021
Texas employment growth increased to an 8.8 percent annualized rate in September after a downwardly revised 3.0 percent (previously 4.4 percent) in August. The Texas Leading Index increased strongly for the second consecutive month—overall, continuing an upward trend that began in May 2020. The movement of the index over the past several months suggests positive employment growth over the next three to six months.
Using a top-down model based on national forecasts, Texas COVID-19 hospitalizations and oil futures prices, we estimate that jobs will increase by 5.1 percent in 2021—up from last month’s estimate of 4.6 percent—with an 80 percent confidence band of 4.6 to 5.6 percent. Based on the forecast, 626,600 jobs will be added in the state this year, and employment in December 2021 will be 13.0 million (Chart 1).
“With COVID-19 hospitalizations in Texas declining since early September, leisure and hospitality and retail jobs have bounced back strongly,” said Keith Phillips, Dallas Fed assistant vice president and senior economist. “Jobs in the energy sector also grew strongly as oil prices remained well above break-even levels. While consumer demand remains strong, the strength of job growth is somewhat surprising given both labor market tightness and supply-chain challenges faced by businesses. Supply-chain issues likely damped growth in September as 64.5 percent of contacts in our business surveys reported having supply-chain disruptions, up from 61.0 percent in June.”
The Texas unemployment rate declined from 5.9 percent in August to 5.6 percent in September. With children returning to in-person schooling and the decline in COVID-19 cases, labor force growth improved somewhat from 2.0 percent in August to 3.3 percent in September.
The Texas Leading Index grew strongly in September, with six of the eight indicators giving positive contributions (Chart 2). The increase in the index was concentrated in a significant improvement in the energy indicators and leading indicators of the national economy. Permits to drill oil and gas wells, the oil price, the U.S. leading index, average weekly hours worked in manufacturing, new unemployment claims and the help-wanted index all contributed positively to gains in the index. In contrast, a slight increase in the Texas trade-weighted value of the dollar and a mild decline in the stock prices of Texas-based companies contributed negatively.
Next release: November 19, 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 from the Institute for Health and Metrics Evaluation, and expected prices of West Texas Intermediate crude oil based on the futures curve.
For additional details, see dallasfed.org/research/forecast/