Texas Employment Forecast

March 24, 2023

The Texas Employment Forecast indicates that jobs will increase 2.8 percent in 2023, with an 80 percent confidence band of 2.1 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 385,000 jobs will be added in the state this year, and employment in December 2023 will be 14.1 million (Chart 1). It implies growth for the rest of the year will be an annualized 2.4 percent.

Texas employment grew 4.6 percent month over month in February after rising a revised 5.5 percent in January.

“February job growth was strong overall, but gains in the service industries masked declines in the goods-producing industries,” said Luis Torres, Dallas Fed senior business economist. “Strength in February was led by employment increases in professional and business services, leisure and hospitality, other services, and education and health services. The goods-producing sector posted losses in energy, construction and manufacturing.”

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

Next release: April 21, 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, and WTI oil price futures. All models include four COVID-19 dummy variables (March–June 2020).

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