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Texas Job Growth Rebounds to 1.9% as Four Sectors Lead Hiring

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Texas Job Growth Rebounds to 1.9% as Four Sectors Lead Hiring

2026-08-12 20:10 UTCBy AlphaScala Research DeskSource reporting: dallasfed.orgEditorial standards1 views

Texas Job Growth Rebounds to 1.9% as Four Sectors Lead Hiring

Texas payroll employment rebounded to 1.9% annual growth in 2025 after near-zero hiring last year, the Dallas Fed said. Four sectors lead: professional services, hospitality, construction and energy.

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Texas payroll employment has bounced back this year, with the state adding jobs at a 1.9 percent annual rate, Dallas Federal Reserve Bank senior vice president Roberto Coronado said Tuesday. That matches the state's long-term average and marks a sharp reversal from last year, when employment growth slowed to near zero.

Coronado, speaking at a Texas Tribune event in Waco, said the rebound follows a period of weak hiring tied to falling immigration, federal cutbacks and broad policy uncertainty. The state's unemployment rate, hovering around 4.5 percent, suggests a balanced labor market where employers seeking workers and workers seeking jobs are in rough equilibrium, he said.

Four sectors account for most of the year-to-date gains: professional and business services, leisure and hospitality, construction, and energy. Within professional and business services, staffing services are a standout. They are typically a leading indicator of broader employment growth, and their recent pickup is a positive signal, Coronado said.

Construction is also growing rapidly, driven largely by data center building across the state. The Dallas Fed's Texas manufacturing and service sector outlook surveys both show employment indexes above zero, meaning growth. The latest readings are strong enough that Coronado said the labor market is likely to accelerate in coming months.

The Dallas Fed's official Texas Employment Forecast calls for 2.0 percent job growth in 2026, with an 80 percent confidence band of 1.5 to 2.5 percent.

Coronado devoted part of his remarks to the impact of artificial intelligence on jobs that do not require a bachelor's degree. About half of U.S. workers lack a college degree, and most research on AI and employment focuses on high-income, college-educated workers. Coronado's colleagues found a wide range of outcomes for non-degree roles. Administrative and IT jobs may face big changes. Truck drivers and auto mechanics may see less immediate disruption.

Jobs with high AI exposure scores still require skills the technology cannot yet handle well, such as active listening and building interpersonal relationships. Investing in those soft skills could offset negative exposure or complement the technical tasks AI takes over, Coronado said.

Short-term credentials, earned through programs requiring less than two years of study, are emerging as one alternative path to good jobs. Dallas Fed research using Census data found that for someone with a high school diploma or associate's degree, a credential adds about $5,000 per year to wages. For someone with a bachelor's degree, the bump is about half that, at $2,600 per year. The averages mask wide variation by industry and employer, Coronado noted, and the value of credentials can shift over time.

The Dallas Fed's community development work includes Advance Together, a program launched in 2020 to help regional coalitions improve education-to-employment pathways. The program provides three years of technical assistance, grants through external funding partners and a peer learning network. The first cohort of four sites wrapped up in 2024 and attracted over $10 million in follow-on investment. A second cohort launched in 2025, supporting four more communities.

One current project is Upskill Waco in McLennan County, run by the local organization Prosper Waco. The initiative targets a problem familiar across Texas: many residents are stuck in low-wage work while employers in manufacturing, healthcare and construction cannot find enough qualified workers. Prosper Waco coordinates training through McLennan Community College and Texas State Technical College, case management through nonprofit partners, and job connections through the local chamber of commerce and the city of Waco.

Participants receive personalized case management, scholarships that often cover the full cost of training and a $15-per-hour stipend for adult learners. One graduate of a construction program now earns over $800 a week with a path to six-figure positions. Another earned a medical office certification and now recruits others into the same programs.

Coronado said the partnership learned through Advance Together that employer engagement is a prerequisite, not something that runs alongside other work. Strong navigator roles, the people who help participants stay on track, proved critical. And alignment requires deliberate effort, even in a city like Waco with a strong culture of collaboration. Upskill Waco is now expanding the industries covered by its training scholarships and examining what truly supports persistence and completion for adult learners.

"The lessons from Upskill Waco and our other Advance Together participants point to what's possible when communities work differently," Coronado said. "When you move beyond coordination to true collaboration, when you're willing to examine not just what you're doing but whether it's actually creating the change you want."