Texas employers cut 18,900 jobs in September, an annualized drop of 1.6% that marks the state's steepest one-month decline since June 2025, when nearly 35,000 positions disappeared. The pullback has pushed year-to-date job growth down to just 0.8% through September, well below the state's long-running average of about 2%, and prompted the Federal Reserve Bank of Dallas to cut its full-year outlook for the state.
Forecast Cut to Below 1% Growth
The Dallas Fed's latest Texas Employment Forecast, released this past week, now projects employment will rise just 0.9% in 2026, with an 80% confidence band running from 0.6% to 1.2%, according to dallasfed.org. That math implies roughly 134,000 new jobs added statewide this year and total employment of 14.5 million by December, a notable step down from where forecasters expected the year to land. Texas's unemployment rate, meanwhile, held steady at 4.4% in September, per a separate Dallas Fed release.
The new outlook is a sharp retreat from where the Dallas Fed stood just months ago. An earlier forecast from April called for 1.9% growth in 2026, with a confidence band of 1.1% to 2.7%, implying 278,400 new jobs and 14.6 million total jobs by year's end, as detailed in the Dallas Fed's April forecast report. As The Dallas Morning News reported, the Dallas Fed had revised its 2026 projection from 1.2% a month earlier and as high as 2% back in July, after a strong June jobs report briefly boosted expectations. Texas job gains had appeared to defy early expectations for much of the year, even as the state navigated high energy costs, rising interest rates weighing on homebuilding, and an immigration crackdown restricting hiring in some key industries.
Government and Construction Lead the Losses
September's losses were concentrated in a handful of sectors. Government and construction led the declines, followed by education and health services, trade and transportation services, financial services, leisure and hospitality, and oil and gas, according to the Dallas Fed's forecast report. Manufacturing and information services were the bright spots, posting the only notable job gains for the month.
Manufacturing's strength was tied to oil and gas activity, export growth, and construction tied to artificial-intelligence data center expansion, the Dallas Fed noted in its release. Texas employment had grown 1.0% year over year as of August, well ahead of roughly 0.3% national growth, according to the Texas Real Estate Research Center's October economic outlook. August's growth figure was itself revised upward to an annualized 2.3%, the Dallas Fed said.
Oil Patch Holds Steady Despite Dip
Texas's upstream oil and gas sector also lost ground in September, shedding 500 jobs to settle at 196,400, though that figure remains 2,400 jobs above where it stood in September 2025, according to Rigzone. For the year through September, upstream employment is still up 4,000 jobs, or 2.1%. Texas also logged more unique oil and gas job postings in September than California, Pennsylvania, Ohio and New York combined, the outlet reported.
Economists Point to Immigration Squeeze
Dallas Fed economist Luis Torres tied the September slowdown directly to tighter labor supply. “The moderation in job growth is consistent with current labor supply constraints that partly result from sharply lower immigration,” Torres said, according to the bank's forecast report. Torres added that the decline pulled year-to-date job growth down to 0.8%, well below the state's long-running average of roughly 2%.
That marks a shift in tone from earlier in the year. Back in July, Torres had described Texas job growth as surprisingly strong despite the same labor constraints, crediting the state's data center buildout and high oil prices for stronger-than-expected figures at the time, per The Dallas Morning News. Economists have broadly attributed the state's 2025 slowdown, when Texas posted 0.8% job growth that year, partly to the Trump administration's immigration crackdown, tariffs, and geopolitical uncertainty, the paper reported.
Dallas Fed economist Pia Orrenius offered a blunter assessment, saying Texas had not returned to trend growth, which she considers unachievable under the state's current labor supply constraints, according to The Dallas Morning News. The Dallas Fed's forecast model had projected growth of just 1.1% early in the year, before the June jobs report temporarily pushed that estimate up to 2%. A Dallas Fed representative told the paper the bank could not discuss the latest forecast further amid a media blackout ahead of the Federal Reserve's next monetary policy meeting. The forecast itself, the bank says, is built from an average of four models incorporating projected national GDP, oil futures prices, and Texas and U.S. leading economic indexes. Meanwhile, the Texas Workforce Commission reported that 15,800 people joined the state's labor force in September, according to FOX 7 Austin.
