Texas Employment Growth Forecast: A Slower Recovery Amid Immigration Policy Changes

According to a recent employment forecast by the Federal Reserve Bank of Dallas, Texas is projected to add approximately 155,000 new jobs in 2026, reflecting a growth rate of 1.1%. This figure is significantly lower than the state's historical average of around 2% annual job growth. Pia Orrenius, a senior economist at the Dallas Fed, noted that while this growth represents a recovery from a virtually flat 2025, it is not indicative of a return to trend growth due to ongoing labor supply constraints. The national labor market has similarly settled into a "low hiring, low firing" environment, with the U.S. adding only 130,000 jobs in January 2026, which was above expectations but still reflects a sluggish recovery.

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The slower job growth in Texas is closely linked to the restrictive immigration policies enacted during the Trump administration. These policies have reportedly reduced the labor market's size and made it more challenging for businesses to retain workers. A Dallas Fed report indicated that one in five Texas businesses has been negatively affected by recent immigration policy changes, which have created a "chilling effect" in immigrant communities. As fear spreads, foreign-born individuals are increasingly likely to miss work or school, further impacting the labor force.

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Recent changes to the H-1B visa program have exacerbated the situation, particularly in North Texas, where tech firms and research organizations rely heavily on skilled foreign workers. In late 2025, President Trump imposed a new $100,000 fee on new H-1B visas, leading to panic among immigrant communities. Additionally, Texas Governor Greg Abbott issued a directive freezing H-1B petitions at state universities and public agencies until 2027, citing concerns that employers were not making sufficient efforts to hire local workers. This has sparked contentious debates about diversity and economic opportunity in areas like Frisco, Texas, where some residents have expressed fears of demographic changes.

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The decline in immigration has led to a significant drop in population growth in Texas, which is crucial for the state's economic model. In 2024, Texas welcomed 355,000 new international residents, but this number plummeted to 167,000 in the following year. Consequently, the state has seen a slowdown in residential construction, despite a notable increase in construction jobs driven by the growth of data centers. In 2025, construction contracts for data centers reached nearly $11 billion, more than double the previous year's figure.

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Looking ahead, the Dallas Fed projects that Texas will continue to experience economic growth, particularly due to the ongoing AI boom and the upcoming World Cup, which is expected to provide a notable economic boost. However, the expiration of COVID-era healthcare subsidies is anticipated to increase the state's uninsured rate, posing potential economic challenges. As Orrenius emphasized, the long-term growth of Texas's economy will depend on critical factors such as human capital, education, and health.

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• “We’ve run our models. We’re going with the 1.1% growth, so that is a significant increase from zero, certainly,” — Pia Orrenius, Senior Economist, Dallas Fed

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• “The stepped-up visibility and intensity of enforcement has produced a chilling effect,” — Dallas Fed Report

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• “I understand there’s a lot of people who are upset the American Dream has been stolen,” — Burt Thakur, Frisco Council Member

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• “The real underlying strengths, the things that really make the economy grow in the long run, [are] things like human capital, whether it’s education or health,” — Pia Orrenius, Senior Economist, Dallas Fed

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While the Dallas Fed forecasts a 1.1% job growth for Texas in 2026, there are concerns about the accuracy of this projection given the significant impact of immigration policies. Additionally, discrepancies exist regarding the actual number of jobs added in previous years, with reports indicating that Texas added less than 11,000 net jobs in 2025, despite a GDP increase.

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