Texas job growth likely to slow in late 2023, Dallas Fed economist says

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After two years of post-pandemic rebounding, job growth in Texas will begin to slow back down in the last few months of the year, said Roberto Coronado, senior vice president and senior economist for the Federal Reserve Bank of Dallas, at a Texas Tribune event Tuesday.

Though the Dallas Fed had forecast 3% job growth statewide this year, Coronado said, it expects growth in the last quarter of 2023 to dip to about 2% — close to Texas’s trend-level growth of 2.1%.

Even as its unemployment rate holds at 4.1% — which is above the national average of 3.8% — Texas has led the country in job growth over the past year, according to a Department of Labor Statistics report released last week. The state logged more than 400,000 new jobs from August 2022 to August 2023.

Coronado pointed to domestic migration of people and businesses into the state as a key driver of the job growth. During and after the pandemic, he said, the numbers of people moving to Texas began to accelerate, coupled with the fact that approximately 82% of people born in Texas still lived there in 2021.

“Why are businesses coming? What we’re hearing from them is it’s a very low cost of doing business, very friendly to businesses,” Coronado said. “And so that’s attractive for businesses and attractive for families to move to Texas and raise your families here.”

The diversity of the Texas economy, from technology hubs in Austin to energy businesses in Corpus Christi, has also bolstered the state’s economic growth, Coronado added. But signs of change may be on the horizon, as rapidly changing technology and artificial intelligence continues to influence the job market, he said.

By 2030, two-thirds of jobs in Texas will require some sort of postsecondary education, but about half of Texans currently have that level of education, he said. On the other hand, Coronado said, about one-third of high-wage, high-demand jobs will not require a bachelor’s degree by 2028 — with most of these jobs concentrated in technical fields like manufacturing and construction.

Community colleges will play a key role in preparing the state for this shift, he added.

“The best models that I think we’ve seen is when community colleges have strong partnerships with the business community in their localities,” Coronado said, “so they understand firsthand ‘What are the local businesses needing today, and how can [this] college community start producing the talent that they need?’”

In the short term, Coronado said the Dallas Fed is focusing on trying to lower inflation rates to 2%, though the Federal Reserve opted not to raise interest rates in its meeting last week. Raising interest rates generally helps lower inflation.

Over the past two and a half years, demand has outstripped supply across the economy, Coronado said. As inflation has ticked upwards, both goods and services have become more expensive nationwide and in Texas.

“What does that mean for the average Texan? That means that they are therefore allocating more of their monthly budget to make ends meet. That means it’s putting pressure on households, putting pressure on businesses, because things are more expensive,” Coronado said. “We believe we need to bring inflation in check.”

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