Outlook for the Texas Economy | February 2025

Outlook for the Texas Economy summarizes significant state economic activity and trends. All measurements are calculated using seasonally adjusted data, and percentage changes are calculated month over month, unless stated otherwise. Click here to receive email notifications each time this report is published.

Overall Texas employment grew in February despite declines in major sectors such as professional business services and health and education. Both labor force participation and unemployment held steady. The overall inflation rate remained above the Fed’s target rate of 2 percent. Finally, Texas exports grew thanks in part to growth in oil and gas exports, which have been increasing since last October. 

February Sees Lower Inflation

The Consumer Price Index (CPI) increased by 2.8 percent over the past 12 months on an unadjusted basis. Seasonally adjusted, the CPI rose by 0.2 percent month –over month (MoM), down from January’s 0.5 percent increase. 

Core inflation, which excludes the volatile food and energy components, rose by 3.1 percent over the past 12 months. On a monthly basis, the core CPI increased 0.2 percent in February. This consistent rise in core inflation suggests underlying inflationary pressures remain robust. However, the modest monthly increase indicates these pressures may be stabilizing.   

Dallas and Austin Lead Texas Job Growth

Texas nonfarm employment posted a modest increase in February, rising 0.1 percent MoM and 1.3 percent year over year (YoY). Among the four major metro areas, Dallas and Austin led job growth with a 0.2 percent gain. San Antonio jobs were the same as last month. Meanwhile, Houston reported a slight decline of 0.1 percent. 

The trade, transportation, and utilities sector added 7,400 jobs in February, marking a 0.3 percent MoM increase. In contrast, both the professional and business services sector and the education and health services sector experienced a modest 0.2 percent decline, each shedding 3,300 jobs. 

The labor force participation rate remained steady at 64.8 percent for the third consecutive month since December 2024, reflecting stability in the state’s labor market engagement. The unemployment rate held firm at 4.1 percent, unchanged from the previous month, indicating a consistent demand for labor despite broader economic uncertainties. Meanwhile, continued unemployment claims averaged approximately 156,542 per week in February—down by 3,521 from January—suggesting a gradual improvement in job retention and a potential softening of layoff activity. 

Service Sector Sees Modest Growth in February

Service sector activity in Texas picked up modestly in February, with private service-providing firms adding 9,000 jobs. According to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey, the revenue index rose three points to 8.2, signaling continued growth at a pace that remains below the historical average. 

Labor market conditions showed little change, as the employment index edged up to –0.2 from –1.4, indicating relatively flat hiring activity. Business sentiment weakened during the month. The general business activity index declined to 4.6 from 7.4, while the company outlook index dropped sharply by 14 points to 1.1, reflecting a significant softening in expectations. Additionally, the outlook uncertainty index surged to 14.2 from 3. The sharp rise in uncertainty could weigh on future hiring and investment decisions if sentiment fails to stabilize. 

Texas Home Sales Declined

In February, total Texas home sales dipped by 2.5 percent, with 28,347 transactions recorded statewide. All major metro areas saw MoM declines, reflecting a broader market slowdown. Austin experienced the steepest drop, down 6.9 percent to 2,557 sales. Dallas followed with a 3.3 percent decrease, totaling 7,713 transactions, while Houston saw a more modest decline of 2.1 percent to 7,302. San Antonio posted the smallest decrease among the big four, down just 1.7 percent to 2,925 sales. These trends suggest that while demand remains relatively stable, lingering interest rate concerns and economic uncertainty may be tempering buyer activity across the state. 

Texas Oil and Gas Exports Continue Positive Run

Texas, a major contributor to U.S. energy exports, saw a rebound in total commodity exports in January, posting a 1.3 percent MoM increase and a 2.7 percent YoY gain. The recovery was driven largely by the state’s top exports—crude oil and natural gas—which recorded a solid 4.1 percent MoM rise and a 6.1 percent increase over the same period last year. Oil and gas exports have been on a positive run since October 2024. 

However, not all segments of the energy sector followed suit. Exports of petroleum and coal products continued to weaken, falling by 13.7 percent MoM and 9.3 percent YoY. The divergence underscores the uneven performance within Texas’s energy trade as global demand patterns and price volatility weigh more heavily on refined products than on raw energy commodities. Continued weakness in this segment may pose headwinds to broader export growth in the coming months. 

Select Economic Indicators

• In February, the Texas Leading Economic Index rose to 126.4, up from 126.1 in January, marking a 0.3 MoM increase. 
• Nominal average hourly earnings increased to $34.55 in February, reflecting a 5.9 percent YoY increase. 
• Earnings were mixed across the four major metro areas in February. Dallas was the only metro to record a decline, with average hourly earnings falling by $0.18. In contrast, Houston, Austin, and San Antonio posted gains of $0.72, $0.14, and $0.41 per hour, respectively. 
• Texas consumer confidence increased by 5.4 percent MoM in February, reaching 124.1. 
• The ten-year U.S. Treasury bond decreased by 18 basis points, standing at 4.45 percent. 
• The Federal Home Loan Mortgage Corporation’s 30-year fixed-rate declined by 12 basis points to 6.84 percent. 
• The West Texas Intermediate (WTI) crude oil spot price decreased by 5.6 percent MoM to $71.53. The Henry Hub natural gas spot price increased by 1.5 percent MoM from $4.13 to $4.19 per million British thermal units (BTU).