Texas Employment Forecast

The Texas Employment Forecast indicates jobs will increase 1.8 percent in 2026, with an 80 percent confidence band of 1.2 to 2.4 percent. The forecast is based on an average of four models that include projected U.S. gross domestic product, oil futures prices and the Texas and U.S. leading indexes. The forecast implies 264,300 jobs will be added in the state this year, and employment in December 2026 will be 14.6 million (Chart 1).

Texas employment grew an annualized 1.2 percent in May, adding 14,400 jobs. Meanwhile, April employment growth was revised up to 2.2 percent.

“Texas employment growth decelerated in May, and state year-to-date job growth remains at 1.6 percent, below its long-run average of 2 percent. That said, Texas job growth has been stronger than expected in light of immigration policies constraining labor supply and higher productivity suppressing labor demand in certain sectors. Moreover, relatively high oil prices have bolstered state economic activity, driving job gains in the oil and gas sector. However, oil prices have recently retreated amid an agreement allowing the Strait of Hormuz to reopen, which may moderate those gains,” said Luis Torres, Dallas Fed senior business economist.

“Job gains in May were strongest in trade and transportation services, followed by leisure and hospitality and construction. Additionally, government, the oil and gas sector, other services and manufacturing reported job gains. However, professional and business services reported the largest employment losses after recording strong gains for five straight months. Education and health services, information services and financial services also registered job losses. The Midland-Odessa oil and gas region led Texas metro job growth in May,” he added.

The Texas Leading Index was flat over the three months ending in May, with mixed contributions across components (Chart 2). The index was boosted by increases in the real oil price, the help-wanted index and well permits. Contribution from the U.S. leading index was zero. Meanwhile, declines in average weekly hours and the Texas stock index, along with increases in new unemployment claims and the Texas value of the dollar, contributed negatively to the overall index.

Next release: July 17

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 for which 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. 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 forecasts of U.S. GDP growth from Blue Chip Economic Indicators and WTI oil price futures as inputs. All models include four COVID-19 dummy variables (March–June 2020).

Learn more about the Texas Employment Forecast.