Texas Employment Forecast, October 20

The Texas State Employment Outlook projects job growth by 3.3% in 2023, with an 80% confidence interval of 3.1 to 3.5%. The forecast is based on an average of four models that include projected national GDP, crude oil futures prices, and leading Texas and U.S. indices. The forecast suggests that 453.2 thousand jobs will be created in the country this year. jobs, and employment in December 2023 will amount to 14.1 million (Chart 1). This means that for the rest of the year economic growth will amount to 2.5%.

Employment in Texas surged in September, adding 61,300 jobs and increasing year-over-year by 5.4 percent month-over-month. Employment growth in August was revised to 1.3%.

“The strength of the Texas labor market continues to surprise on the upside,” said Luis Torres, senior business economist at the Dallas Fed. “Job growth in September was driven by the manufacturing sector, which includes oil and gas, manufacturing and construction. In the services sector, education and health, professional business services, and trade and transportation saw strong job growth after job losses in the previous month. The only sectors that recorded job losses were other services and information. The metropolitan areas, especially Dallas, San Antonio, Austin and Houston, have seen very strong job growth.”

The Texas Leading Index rose in the three months through September (Chart 2). Significant positive factors included a decline in new unemployment claims and increases in the real price of West Texas Intermediate crude oil, average work hours, the Texas stock index and drilling permits. However, the increase in the value of the dollar in Texas and declines in the leading US index and the Help Needed Index weighed on the index.

Next release: November 17, 2023

Methodology

The Dallas, Texas Fed’s employment forecast projects calendar-year job growth and is estimated as the 12-month change in employment from December to December.

The forecast is based on the average of four models. The three models are vector autoregressions in which Texas employment is regressed on lags of West Texas Intermediate (WTI) crude oil prices, the U.S. Leading Index and the Texas Leading Index, respectively. The fourth model is an autoregressive distributed lag model that regresses employment on lags of employment, current and lagged values ​​of U.S. GDP growth and WTI oil prices, and COVID-19 hospitalizations in Texas through March 2023. Projections for Texas employment based on this the model also uses as input US GDP growth forecasts based on Blue Chip economic indicators and WTI oil price futures. All models include four dummy variables for COVID-19 (March, June 2020).

Additional details can be found at dallasfed.org/research/forecast/.