- The Dallas Fed forecasts Texas employment will rise just 1.2% in 2026, adding roughly 173,600 jobs and pushing statewide employment past 14.5 million by December.
- August employment rose at an annualized 1.6% rate with 18,500 jobs added, led by professional and business services, construction, government and manufacturing.
- Senior economist Luis Torres attributed the slowdown to labor supply constraints, a headwind that could ease hiring pressure for CRE-heavy sectors like office and industrial.
The Federal Reserve Bank of Dallas expects Texas job growth to slow to 1.2% in 2026, a marked deceleration from the state’s historic pace, according to the Dallas Fed’s latest employment forecast.
The bank projects the state will add about 173,600 jobs this year, bringing total employment to roughly 14.5 million by December, a pace that has direct implications for tenant demand across Texas commercial real estate.
Get Smarter About What Matters in Texas
Subscribe to our free newsletter covering the biggest commercial real estate stories across Texas — delivered in just 5 minutes.
A Cooling Labor Market
Texas employment growth has been running below its long-run average of 2% for much of 2026, a trend Dallas Fed senior business economist Luis Torres linked to labor supply constraints reflected in the state’s first-quarter benchmark revisions.
Year-to-date job growth sits at just 1.0%, even after a rebound in August, when the state added 18,500 jobs at an annualized 1.6% pace following a nearly flat July. The swing between the two months underscores how choppy the state’s hiring trend has become.
The state’s population and business growth have long outpaced the national average, but Torres’s comments suggest the labor market itself, not weaker demand, is now the binding constraint on how fast Texas can add jobs.
The Details
The Dallas Fed’s 80% confidence band puts 2026 job growth between 0.8% and 1.6%, with the next update due Oct. 16. August’s gains were led by professional and business services, construction, government, manufacturing and leisure and hospitality, with additional support from financial services, trade and transportation, and education and health services.
Oil and gas employment was flat for the month, while other services and information sectors posted losses. The state’s Leading Index also declined over the three months ending in August, weighed down by lower oil prices, reduced average weekly hours and softness in the Texas Stock Index.
Those same three months brought a partial offset: decreased unemployment claims and an uptick in well permits helped cushion the index’s decline, a sign the slowdown isn’t uniform across every corner of the Texas economy.
Construction’s strength in particular stands out for an industry still working through elevated financing costs, while gains in professional and business services point to continued demand for office-using employment even as overall growth slows.
Zooming Out
The slowdown comes as Texas commercial real estate braces for a broader deceleration. A recent Texas real estate forecast points to similarly moderating momentum heading into 2027, even as the state continues to outpace much of the country in absolute job creation.
Construction and manufacturing, two sectors closely tied to industrial and multifamily development pipelines, were among August’s strongest performers, suggesting that even at a slower overall pace, certain corners of the build-to-lease economy are still adding workers.
Why It Matters
Slower job growth matters for CRE fundamentals: tenant demand across office, industrial and multifamily properties tends to track employment gains, and a cooling labor market could soften absorption in 2026 and 2027.
The forecast lands as the broader industry navigates higher rates and mounting uncertainty in 2026, adding to the case for owners and lenders to temper growth assumptions in Texas markets.
Labor supply, not demand, is the constraint Torres flagged, which means the slowdown may reflect a tighter workforce rather than a weaker economy. For landlords underwriting new leases, that distinction matters: a tight labor pool can still support rent growth even as headline job totals moderate.
What’s Next
The Dallas Fed’s next employment update is due Oct. 16, which will show whether August’s rebound holds or if labor supply constraints continue to weigh on hiring.
CRE investors watching Texas markets will be looking for whether job growth stabilizes near the 1.2% projection or drifts toward the lower end of the Fed’s confidence band, especially in construction- and manufacturing-heavy submarkets tied to the state’s industrial pipeline.
Analysts will also watch whether the gap between the Texas Leading Index and actual job gains narrows, or whether soft oil prices continue to act as a drag heading into next year.
