Texas Employment Forecast

December 16, 2022

The Texas Employment Forecast indicates that jobs will increase 3.5 percent in 2022, with an 80 percent confidence band of 3.2 to 3.7 percent. The forecast is an average of four models that are based on projected national GDP, oil futures prices and the Texas Leading Index. The estimate is lower than last month’s projection of 4.3 percent. The forecast declined due to large downward revisions in Texas employment when benchmarking the payroll survey to the Quarterly Census of Employment and Wages. Growth in the first half of the year was consequently revised down from 4.7 to 3.3 percent (annualized rate). The forecast suggests that 452,000 jobs will be added in the state this year, and employment in December 2022 will be 13.5 million (Chart 1).

Texas employment grew 3.7 percent in November after rising 3.4 percent in October. “By adding over 40,000 jobs in November, Texas year-to-date job growth is a solid 3.5 percent despite the downward revision to the first half,” said Luis Torres, Dallas Fed senior business economist. “Strength in November was led by an increase in employment in leisure and hospitality, information services, education and health services, and mining employment. Only construction posted losses.”

The Texas Leading Index continued its decline in the three months through November (Chart 2). The index components were nearly all negative, with weakness led by a decline in help-wanted advertising and an increase in new unemployment claims. A decline in well permits, the real price of West Texas Intermediate oil, and the U.S. leading index also dragged on the index. Increases in the Texas Stock Index and average weekly hours worked in manufacturing were positive contributors. The weakness in the leading index suggests a further slowing in job growth going into 2023.

Next release: February 3, 2023

Methodology

The Dallas Fed 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 (VARs) where Texas payroll employment is regressed on West Texas Intermediate (WTI) oil prices, the U.S. leading index and the Texas Leading Index, respectively. The fourth model is a regression of payroll employment on expectations for U.S. GDP growth and WTI oil prices, four COVID-19 dummy variables (March–June 2020) and projected Texas COVID-19 hospitalizations from the Institute for Health and Metrics Evaluation.

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