Economic forecasters at the Federal Reserve Bank of Dallas on Friday released an outlook for the Texas economy in 2026, projecting modest gains in employment while highlighting continued uncertainty in the state’s labor market.
The annual Texas Economic Outlook projects that Texas employment will increase about 1.1% in 2026. The outlook reflects an average of multiple economic models that incorporate national gross domestic product projections, oil price futures, and leading indicators for both the U.S. and Texas economies.
The forecast follows an unusually sluggish period for the state’s job market in 2025, when employment growth was essentially flat — a sharp departure from the rapid gains Texas recorded earlier in the decade. Recent estimates suggest job growth last year was minimal, ranging from near zero to about 0.1%, with some sectors shedding jobs.
“Employment growth weakened during fourth quarter 2025,” said Luis Torres, senior business economist at the Federal Reserve Bank of Dallas. “Taken together with the negative benchmark revisions in the first half, 2025 Texas job growth through November is slightly negative at minus 0.1% — well below its long-term average of 2%.”
The Texas Economic Outlook gathering drew business and community leaders from across the state, offering a forum to discuss prospects for job creation, wage trends and economic growth.
Economists at the event emphasized that while the outlook for 2026 shows improvement, risks remain. Slower labor force growth, shifting industry demand and broader national economic uncertainty could temper expansion, they said, making the pace of hiring dependent on conditions at both the state and national levels.
“Higher productivity is suppressing labor demand, and less immigration is constraining labor supply,” Torres said.
Recent business surveys show mixed signals across sectors, with manufacturing activity posting gains in January after contracting late last year, while service industries reported steady growth.