Texas Employment Forecast

April 21, 2023

The Texas Employment Forecast indicates that jobs will increase 2.4 percent in 2023, with an 80 percent confidence band of 1.8 to 3.1 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 332,500 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 1.9 percent.

Texas employment grew 3.0 percent month over month in March after a large downward revision in February to 3.2 percent.

“The slower job growth in March and downward revisions to February’s number suggest the labor market may be cooling off after growing at record-high rates for two years,” said Luis Torres, Dallas Fed senior business economist. “The March employment data were notable in that construction and energy employment bounced back, while growth in professional and business services, financial activities and information was notably weaker.”

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

Next release: May 19, 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 Texas COVID-19 hospitalizations through March 2023. 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/.