Texas Employment Forecast
June 18, 2021
Texas employment grew at a moderate 2.5 percent annualized rate in May after increasing by a revised 2.2 percent in April. The Texas Leading Index increased strongly for the second consecutive month. With the exception of a slight decline in March 2021, the index has increased every month since May 2020, suggesting continued expansion in the second half of the year.
Using a top-down model based on national forecasts, COVID-19 hospitalizations and oil futures prices, we estimate that job growth will increase by 4.1 percent in 2021—down from last month’s estimate of 6.6 percent—with an 80 percent confidence band of 3.2 to 5.0 percent. Based on the forecast, 510,500 jobs will be added in the state this year, and employment in December 2021 will be 12.8 million (Chart 1).
“The forecast was revised down this month primarily due to an upward revision in the anticipated path of COVID-19 hospitalizations,” said Keith Phillips, Dallas Fed assistant vice president and senior economist. “While the percentage of Texans vaccinated against COVID-19 continues to increase, the pace of vaccinations has slowed, and the more contagious Delta variant is spreading. Together, these two patterns have changed the outlook for COVID-19 hospitalizations in the third quarter from a consistent downward trend to a slight increase through September. Since the summer of 2020, the strength of the recovery has been negatively correlated with COVID-19 hospitalizations.”
The Texas Leading Index continued to increase strongly in May (Chart 2). Gains in the index were broad-based across components and led by a sharp decline in initial claims for unemployment insurance. The other labor market indicators in the index—help-wanted advertising and average weekly hours worked in manufacturing—gave more moderately positive signals. The U.S. leading index, the Texas trade-weighted value of the dollar, the real oil price and the stock prices of Texas-based companies also gave positive signals. Permits to drill oil and gas wells declined slightly.
Next release: July 16, 2021
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.
Due to the rapid onset of the COVID-19 pandemic, the forecasting model used in this release of the Dallas Fed Texas Employment Forecast differs from the model used historically. In this case, payroll employment is estimated based on expectations for U.S. GDP growth for 2021, an estimate of direct COVID-19 impacts from March to May 2020, projected hospitalizations in Texas for COVID-19, and expected prices of West Texas Intermediate crude oil based on the futures curve.
For additional details see dallasfed.org/research/forecast/