The Texas Employment Forecast indicates jobs will increase 1.9 percent in 2025, with an 80 percent confidence band of 1.2 to 2.6 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. In addition, this forecast utilizes Texas employment data that have been adjusted to include anticipated downward revisions by the Bureau of Labor Statistics. The forecast implies 276,000 jobs will be added in the Texas this year, and employment in December 2025 will be 14.5 million (Chart 1).
Texas employment grew an annualized 2.1 percent in February, adding 25,700 jobs. Meanwhile, January employment was revised down to 1.7 percent growth.
“February job growth was broad based, led by increases in the energy, leisure and hospitality, and construction sectors. Only employment in professional and business services dropped,” said Jesus Cañas, Dallas Fed senior business economist. “Employment rose in most major metropolitan areas of the state, but fell in Houston and Austin,” he added.
The Texas Leading Index rose over the three months through February (Chart 2). Changes in the index components were mixed. Increases in average weekly hours, help wanted index, Texas stock index, well permits, and a small decline in new unemployment claims were positive contributors. Declines in the U.S. leading index, the real oil price and an increase in the Texas value of the dollar dragged on the index.
Next release: April 18, 2025
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).
For additional details, see dallasfed.org/research/forecast/.
The forecasting model has been in use at the Dallas Fed since the early 1990s, and the employment forecast has been published in the Western Blue Chip Economic Forecast (WBCF) since 1994. Phillips and Lopez (2009) show that the model has been the most accurate in forecasting Texas job growth relative to other forecasters in the WBCF. In particular, the model had the lowest root mean squared error and has been the closest to the actual the most times (nine of the last 17 years) out of five forecasters that have consistently participated in the survey.
For more details about the model and its performance, see “An Evaluation of Real-Time Forecasting Performance Across 10 Western U.S. States,” by Keith R. Phillips and Joaquin Lopez, Journal of Economic and Social Measurement, vol. 34, no. 2–3, December 2009.
-->Contact Information
For more information about the Texas Employment Forecast, contact Jesus Cañas at [email protected].
