Dallas Chapter August Meeting!
- Texas’ economy regained momentum in 2026 after experiencing relatively weak growth in 2025. Employment grew at an annualized rate of approximately 1.6% through July, compared with 0.7% during 2025.
- Texas is currently outperforming the nation in job creation. The Dallas Fed forecasts statewide employment growth of approximately 1.7% for 2026, with a projected range of 1.3% to 2.1%.
- Professional and business services are leading employment gains. Education and health services, financial activities, and leisure and hospitality are also contributing to growth, while construction and information employment have weakened.
- Employment growth is occurring across Texas’ major metropolitan areas. Austin and Dallas are posting the strongest gains, followed by Fort Worth, San Antonio, Houston, and the state overall.
- Reduced immigration contributed significantly to slower job growth in 2025. Continued limits on immigration could constrain the labor supply and make it more difficult for employers to fill positions.
- Texas’ unemployment rate has increased slightly to approximately 4.5%, compared with 4.1% nationally. Despite this increase, Dallas Fed business surveys indicate continued expansion in both manufacturing and service-sector activity.
- Data-center development is a major economic driver. Fueled by artificial intelligence and rapidly growing computing demand, data-center construction is significantly outpacing overall construction activity, with Texas leading the nation in new data-center construction during 2026.
- The residential real estate market remains soft. Housing permits and home sales are still relatively low, while mortgage rates remain near 6%, limiting affordability and new residential construction.
- Apartment markets continue to favor renters. Rents are declining across most major Texas metropolitan areas as recently delivered units and elevated supply continue to place downward pressure on pricing.
- Office-market performance remains mixed. Vacancy increased slightly in Houston during the second quarter of 2026 but declined or stabilized in several other major Texas markets. Vacancy levels nevertheless remain elevated across the state.
- High oil prices are providing support to the Texas economy. Prices remain above the level generally required to profitably drill new wells, rig counts have increased, and both crude-oil and natural-gas production are trending upward.
- Businesses expect wage and price pressures to remain elevated. Survey respondents anticipate wage growth of approximately 3.6% and input-price growth of approximately 4.4% during the next 12 months.
- Inflation is now the most commonly cited concern among Texas businesses. Other leading concerns include geopolitical uncertainty, demand and potential recession risks, domestic policy uncertainty, labor costs, and labor availability.
- Geopolitical conflict is affecting business decisions. Nearly half of surveyed firms reported a negative impact from the Iran war, with affected businesses most frequently responding by reducing or delaying hiring and capital investment.
Overall Outlook
The outlook for Texas remains moderately positive. Continued investment in artificial intelligence and data centers, favorable federal tax provisions, and strong energy prices should support growth. However, persistent inflation, labor shortages, trade and geopolitical uncertainty, elevated borrowing costs, and weakness in residential construction remain meaningful risks.
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