Texas leads nation in annual job gains despite slower hiring

Texas once again led the nation in annual job gains in September, a familiar trend for one of the country’s largest labor markets. However, this achievement coincides with slower employment growth, as economic forecasts and employer surveys paint a more nuanced picture than the headline number suggests. 

According to the U.S. Bureau of Labor Statistics, employers in Texas added 154,300 nonfarm jobs in the 12 months ending in September, representing a 1.1 percent increase. This surpassed California’s gain of 129,300 and North Carolina’s 67,000, with Texas’s annual growth rate exceeding the national rate by 0.8 percentage points. 

Texas’s sheer size often places it at the top of such rankings, though California has a larger employment base. When measured by the percentage increase in nonfarm payroll jobs over the year, South Carolina (2.3 percent), Louisiana (1.8 percent), and Utah (1.5 percent) grew faster, even as Texas added more positions numerically. 

Leading the numerical rankings is not new territory for Texas, which also topped annual gains in September 2024 and June 2025. Nevertheless, the state’s latest annual growth rate remains below its long-running average of approximately 2 percent, according to the Federal Reserve Bank of Dallas. This highlights a distinction between outperforming other states and maintaining Texas’s own historical pace. 

The Dallas Fed projects Texas employment to increase by 0.9 percent in 2026, adding approximately 134,000 jobs. Their October forecast, which measures changes from December to December, reflects a softer outlook compared to their August projection of 1.7 percent. 

Luis Torres, a senior business economist at the Dallas Fed, attributed slower growth partly to labor-supply constraints linked to significantly reduced immigration. He identified manufacturing activity, supported by energy, exports, and construction related to artificial intelligence expansion, as key areas of strength. 

September’s payroll figures further underscore the loss of momentum. Texas employers shed 11,100 positions during the month, leaving approximately 14.46 million nonfarm jobs. The seasonally adjusted unemployment rate held steady at 4.4 percent, compared with the national rate of 4.2 percent. 

Industry results were mixed. Manufacturing added 4,700 jobs in September, while construction lost 2,400, and trade, transportation and utilities shed 3,100. Over the preceding year, professional and business services employment increased by 3.3 percent, while information employment declined by 3.9 percent. 

Manufacturers who responded to the Dallas Fed’s September survey reported accelerating production, stronger orders, and faster hiring. Their employment index rose from 8.0 to 15.1. This index measures the share of respondents reporting employment increases minus the share reporting decreases, rather than representing a percentage increase in factory jobs. 

These gains were accompanied by increased pressure from materials costs, wages, and benefits. Manufacturers still anticipated expansion six months ahead, but their outlook for broader business activity moderated even as current production strengthened. 

Service businesses presented a more cautious picture. Their revenue index fell to a near-zero reading, indicating that activity was essentially unchanged in September. While hiring increased modestly, company outlooks deteriorated, and uncertainty rose above its historical average. 

Operating expenses also increased, with the service-sector input-price index reaching its highest level since December 2022, although wage pressures eased. Despite these challenges, respondents anticipated revenue growth, and their measures of future hiring and capital spending remained positive. The survey indicated that businesses expect expansion while navigating higher costs and greater uncertainty. 

Separate research by the Dallas Fed examines a longer-term shift in employer demand. Using Lightcast job-posting data (formerly Burning Glass), researchers investigated whether Texas employers were reducing recruitment for occupations with tasks that generative AI could automate. Their comparisons accounted for differences among industries. 

Researchers estimated that exposure to AI automation reduced total Texas job postings by approximately 2.6 percent in 2025. Existing employers shifted recruitment away from more automatable positions, suggesting that changes were occurring within established businesses rather than solely through the arrival of new companies requiring fewer workers. 

These findings pertain to advertised demand, not a count of eliminated jobs, and do not establish the cause of September’s employment losses. Additionally, online postings underrepresent occupations such as construction, farming, and building maintenance, limiting the broad applicability of these results. 

Workers’ pay offers another perspective. The Dallas Fed’s October economic indicators report showed Texas’s three-month average hourly wage at $36.01 in August, a 4.5 percent increase over the year. These nominal figures do not account for inflation. The report also documented weaker housing activity, with both home sales and building permits declining in August. 

The next Dallas Fed manufacturing and service-sector surveys, scheduled for Oct. 26 and 27, will provide further assessment of hiring, business expectations and cost pressures. These surveys will help determine whether manufacturing strength persists and if service businesses’ expectations for expansion translate into stronger activity. 

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