Texas’ economy is showing signs of cooling off, according to a recent report from the Federal Reserve Bank of Dallas. The state’s job growth projection for the year has been adjusted downward from 2.4% to 1.9%. Luis Torres, a senior business economist at the Dallas Fed, attributed the slower growth in the second half of the year to a cooling labor market and job losses in the service sector.
“Slower employment growth, combined with decreases in the Texas and U.S. leading indexes lowered the forecast,” Torres said. In June, Texas lost approximately 1,900 jobs, a significant change from the 36,700 jobs added in May, based on seasonally adjusted and benchmarked payroll employment numbers. Despite the expected slowdown, economists Bill Adams and Waran Bhahirethan from Comerica Bank forecast that Texas will still outperform the national economy.
Texas economy expected to slow
However, they predict that job growth will decelerate as interest rates rise, inflation persists, and softer U.S. and global economies limit the capacity of Texas employers. The economic slowdown has led to job losses for some workers.
Nearly 2,700 Tesla employees in Austin were laid off in June, and nearly 1,500 Dallas-Fort Worth Walmart employees are being asked to relocate by the end of January or face job loss. The Dallas Fed’s forecast suggests that Texas will add 266,100 jobs this year, with December employment projected to reach 14.3 million. Torres noted, “We’re going back to pre-pandemic levels, so these levels are sustainable.”
Despite the challenges, the Dallas Fed remains optimistic about the overall trajectory, emphasizing a return to more manageable growth rates.
The state’s economy is expected to continue outperforming the national economy, although at a more moderate pace compared to recent years.
