Editor’s note: In its “Economy at a Glance” report for January, the Greater Houston Partnership – the regional chamber of commerce – highlights its 2026 employment forecast for metro Houston. The main body of the report is presented here by permission.
U.S. Employment
The U.S. labor market has slowed down from the dramatic pace of growth experienced in the immediate pandemic rebound. Between 2021 and 2023, the U.S. added an average of roughly 4.7 million workers each year as the economy went into overdrive to recover lost jobs. By 2024, the job growth rate came back to earth with a more typical 2.1 million jobs added during the year. In 2025, job growth slowed even further, falling below the pre-pandemic trend with just 1.3 million jobs added as the labor market encountered new headwinds.
Macroeconomic conditions shifted early in the year, with greater business uncertainty on issues like trade policy, interest rates, and the growing prominence of new A.I. technologies. Many businesses responded to this unfamiliar landscape by pulling back on expansion and hiring, choosing instead to emphasize cost discipline and improving the productivity of existing workers. As a result of these shifts, monthly U.S. job openings fell from 7.7 million to 7.2 million between January and August, while layoffs held steady at about 1.7 million over the same period. In other words, the job market slowdown simply reflects less hiring and not more firing. This is different from a recessionary pattern: the labor market is still expanding, just modestly, with employers pulling back on new hiring while holding on to the workers they already employ.
Even as terminations remain low, the U.S. unemployment rate has ticked up from an average of 4.0 percent in 2024 to 4.2 percent in 2025 as new job seekers enter a workforce with fewer available openings. The U.S. unemployment rate overall averaged at 6.2 percent in the decade before the pandemic – the lower rates of around 4.0 percent during the past few years are unusual over the longer course of U.S. history. So, while national unemployment rates have ticked up slightly in 2025, they remain below long-term norms.
The conditions that led to a slower job market are unlikely to fade quickly. Job growth should remain positive but subdued through the opening months of 2026, with a rebound possible later in the year. The national unemployment rate is expected to rise slightly, though it should remain below 5.0 percent.
U.S. Economic Output
Despite the softening labor market, economic output has continued to expand through the first half of 2025. Gross domestic product (GDP), the broadest measure of U.S. output, grew with the nation producing almost 24 trillion dollars of goods and services for the 12 months ending in Q2 2025. The GDP growth rate briefly turned negative in Q1 (-0.6 percent) as tariff uncertainty prompted firms to stockpile imported inventories and temporarily displace domestic production. However, growth rebounded quickly to 3.8 percent in Q2, before hitting an impressive 4.3 percent in Q3. Bureau of Labor Statistics data shows U.S. manufacturing output rebounded in Q2 with 2.4 percent growth after a Q1 decline, led by greater productivity in durable goods.
A renewed focus on productivity, cost discipline, and the adoption of new AI technologies suggest that economic output will continue to outpace job growth. However, without broader business expansion and additional hiring, these forces are more likely to support moderate growth than to ignite a period of rapid acceleration.
While this trajectory may be slower than what we have become accustomed to in recent years, it still represents forward momentum with relatively low odds of a recession. An October 2025 Wall Street Journal survey of economists puts the probability of a U.S. recession in the next 12 months at 33 percent. That figure is higher than the 22 percent reported in January, but lower than the peak of 45 percent reached in April, when uncertainty over trade policy was at its highest.
A snapshot of Houston
While the broader U.S. economy faces mounting challenges and energy markets show signs of softening, Houston has several strengths that help keep the regional economy resilient. It currently has the fastest-growing economy of any major U.S. metro: from 2021 to 2023, Houston’s GDP surged 25.1 percent, the strongest gain among the 20 most populous metros. That growth rate was nearly double the pace seen in leading coastal economies such as New York, Los Angeles, and San Francisco.
Houston’s dynamism stems from several key strengths, beginning with its diverse industrial base. While the “Energy Capital of the World” title is well earned, the region is far more than an oil and gas hub. Over recent decades, Houston has broadened its economy, with major job gains in health care, advanced manufacturing, and professional and technical services, among other sectors. With shifting trade policies influencing more onshoring, Houston could capture even more of this activity.
Houston also benefits from a young and growing population. It is the youngest major metro in the U.S., with more than one in four residents under age 18. Over the past decade, the region has added more than one million residents, a 20.1 percent increase.
Among the nation’s 20 largest metros, only Orlando grew faster at 26.7 percent, though Houston’s gains of roughly 1.3 million people were far larger in absolute terms. In 2024, Houston led all major metros in both birth rates and net migration, attracting newcomers from across the country and around the globe. Unlike retiree destinations such as Florida, most people move to Houston to work, supplying a steady pipeline of young talent that will help power the region’s workforce in ’26 and beyond.
Forecast Predictions
The Partnership forecasts that metro Houston will add 30,900 positions in 2026, reaching a record 3.52 million jobs by the end of the year. Although this falls below Houston’s recent average of roughly 50,000 jobs added annually, it is broadly in line with the muted national outlook described above. Lower oil prices will remain a headwind and weigh more heavily on our region. Even so, Houston’s young, skilled workforce and strong pipeline of major new projects should help offset energy sector pressures and keep regional growth on pace with the nation.
The strongest job gains are expected in health care, construction, public education, public administration, professional and technical services, and restaurants and bars. Most of these sectors serve Houston’s growing population and feature work that is more labor-intensive and difficult to automate.
In contrast, sectors that are strongly linked to upstream oil production, like oil and gas extraction, manufacturing, and administrative support services, are projected to weaken and shed jobs as lower oil prices curb new drilling, revenues, and business expansion.
Houston’s outlook for 2026 reflects a year of steady, sustainable progress. While job growth may be slower during the start of the year, the region is still expected to reach a new employment record of over 3.5 million jobs by year-end, evidence that Houston remains on solid footing even in a cooler national economy.
Houston has repeatedly shown it can adapt, diversify, and emerge stronger from periods of uncertainty. With solid fundamentals in place, the region is well positioned to navigate what may be a modest year and accelerate once national conditions improve. The trajectory remains positive, and Houston’s long-term story is still one of strong growth and opportunity
Note: The geographic area referred to in this publication as “Houston,” “Houston Area” and “Metro Houston” is the ten-county Census designated metropolitan statistical area of Houston-Pasadena-The Woodlands-Sugar Land, TX. The ten counties are: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto, and Waller.
Find the full “Economy at a Glance” report at houston.org/houston-data/economy-at-a-glance-january-2026. Read the Fort Bend Star’s coverage of the Greater Houston Partnership’s Houston Economic Forecast event in December at fortbendstar.com/business_real_estate/ghp-region-to-see-slowing-economic-growth-in-2026/article_4a072668-1f86-4957-b10c-c0378eeb5ff9.html.