Sign up for TPR Today, Texas Public Radio's newsletter that brings our top stories to your inbox each morning.
Texas will see job growth of little more than 1% in 2026 after flat job growth in 2025, according to a top official at the Federal Reserve Bank of Dallas.
That's nearly 155,000 jobs this new year compared to only about 11,000 jobs created last year.
Pia Orrenius, a vice president and labor economist at the Federal Reserve Bank of Dallas, spoke as part of the release of its 2026 "Texas Employment Forecast" on Friday.
Orrenius said among major Texas cities, Dallas and Houston ended 2025 with flat job growth, while Austin led the way with nearly 1% job growth. San Antonio showed job declines in 2025 of just over half-a-percentage point.
The Alamo City's job growth was dragged down by a slower 2025 in the leisure and hospitality industry.
She said the federal immigration crackdown constrained the labor supply in Texas in 2025 and will likely do so in 2026.
"It's almost more the chilling effect than it is people actually leaving or being deported," she said. "We have a very large immigrant population."
She said employer surveys are mostly optimistic about the Texas economy in 2026, but there is still plenty of caution.
Texas unemployment stood at 4.3% in December 2025.
Orrenius said while new home construction in Texas will likely be soft, non-home construction should be strong. She said the AI boom and the construction of new data centers will keep Texas second to only Virgina in the data center industry.
She said fears have eased somewhat that Texas will have enough water to cool data centers built here.
"With the newer data centers, they are not as reliant on water as kind of the older model of data center," Orrenius said. "And also, in many cases this water can be reused with the data centers to cool the servers."
She also said the impact of tariffs on the U.S. economy have not turned out to hurt as much as once feared. She said many sectors made internal adjustments to deal with the tariffs, while limiting some costs passed on to consumers.
Orrenius said retaliatory tariffs, except by China, also never materialized.
She said some tax provisions under the "Big Beautiful Bill" should help businesses in 2026.
Orrenius said World Cup soccer games hosted by Texas in 2026 should also help lift the economy.
She said one big drag on the state economy is the fact Texans pay a lot of money out-of-pocket for property insurance. Texas homeowners have seen property insurance rates jump 58% percent in the past five years, twice the national average increase.
Orrenius said that has led to some homeowners to reduce the amount of coverage they carry to make it affordable.
