Texas Employment Forecast

March 10, 2023

The Texas Employment Forecast indicates that jobs will increase 2.8 percent in 2023, with an 80 percent confidence band of 2.0 to 3.5 percent. The forecast is based on an average of four models that include projected national GDP, oil futures prices and the Texas and U.S. leading indexes. The forecast suggests that 380,000 jobs will be added in the state this year, and employment in December 2023 will be 14.1 million (Chart 1). This implies growth for the rest of the year (Feb.–Dec. 2023) will be an annualized 2.5 percent.

Texas employment grew 5.7 percent month over month in January after rising a revised 2.9 percent in December. “January job growth accelerated sharply, with broad-based gains across most industries,” said Luis Torres, Dallas Fed senior business economist. “Strength in January was led by employment increases in energy, construction, other services, and leisure and hospitality. Only information services posted losses.”

With the release of the January data, the Texas Workforce Commission included its annual benchmark, which resulted in additional upward revisions that—together with the strong January and upwardly revised December data—pushed up the 2023 forecast.

The Texas Leading Index increased over the three months through January (Chart 2). Changes in the index components were mixed; declines in the Texas value of the dollar and new claims for unemployment, and an increase in the Texas stock index were significant positive contributors. In contrast, declines in the help-wanted index, U.S. leading index, real price of West Texas Intermediate oil, well permits and average weekly hours dragged on the index.

Next release: March 24, 2023

Methodology

The Dallas Fed's 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.

The forecast is based on the average of four models. Three models are vector autoregressions where Texas payroll employment is regressed on the lags of West Texas Intermediate (WTI) oil prices, the U.S. leading index and the Texas Leading Index, respectively. The fourth model is an autoregressive distributed lag model with regression of payroll employment on lags of payroll employment, current and lagged values of U.S. GDP growth and WTI oil prices, and current Texas COVID-19 hospitalizations. Forecasts of Texas payroll employment from this model also use as inputs forecasts of U.S. GDP growth from the Federal Reserve Bank of Dallas, WTI oil price futures and projections of hospitalizations from the Institute for Health and Metrics Evaluation. All models include four COVID-19 dummy variables (March–June 2020).

For additional details, see dallasfed.org/research/forecast/.