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Texas adds 48,600 jobs in January as pace of growth accelerates

For second straight month, every Texas job sector posted net gains while U.S. job growth continued in February.

Editor’s note: This story has been updated.

Interest rates may be rising and Wall Street may be fretting, but the labor market just keeps on growing — both in Texas and nationwide.

Texas added 48,600 nonfarm jobs in January, the most since October 2022 and the 16th consecutive month of record employment in the state, the Texas Workforce Commission said Friday.

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Texas’ seasonally adjusted unemployment rate ticked up to 3.9%. Statewide unemployment has remained below 4% since March 2022, an indication that the tight labor market persists.

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That’s a challenge for employers looking to add talent and grow. But it’s a boost for workers looking to improve their prospects. And the accelerating pace of job growth keeps surprising economists.

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“For the last 11 months, I’ve been expecting Dallas-Fort Worth, Austin and everywhere in Texas to slow down, and I’ve been wrong,” said Adam Perdue, an economist with the Texas Real Estate Research Center at Texas A&M University. “The idea that we’re sustaining such high rates of growth is kind of hard to wrap my head around.”

Perhaps the growth, he said, “is just going to continue to continue.”

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Texas’ job numbers for January were released the same day as the national employment report for February, which also showed stellar growth continuing.

The U.S. added 311,000 nonfarm jobs in February, lower than the 504,000 jobs added in January, but well ahead of the gains in February 2020 before the pandemic hit, according to the U.S. Bureau of Labor Statistics.

The national unemployment rate edged up to 3.6% in February and has shown little net movement since early 2022, the bureau said.

In Texas, January job growth was led by the leisure and hospitality sector and professional and business services. Each recorded over 8,000 net hires for the month.

Construction and manufacturing each added 5,900 jobs. And the Texas oil patch continued to expand with a net increase of 2,500 jobs — the biggest one-month percentage gain.

“For the second consecutive month,” the workforce commission said, “every major industry had positive over-the-month employment growth.”

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Even the government sector, Texas’ slowest-growing job category over the past 12 months, added 5,700 jobs in January.

“They needed to catch up because they weren’t able to hire for a long period of time,” said Pia Orrenius, a senior economist at the Federal Reserve Bank of Dallas. “But the big surprise here is the goods-producing sector.”

That sector includes oil and gas (in the mining and logging category), construction and manufacturing.

Oil and gas has been hiring at a rapid clip for over a year, and its strength was expected to continue.

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But construction has been cutting workers, in part because the segment is so sensitive to interest rates, which the Federal Reserve has been ratcheting up in an effort to curb inflation. Construction jobs in Texas declined from August through November before adding 700 jobs in December. Then, in January, construction had a net gain of 5,900 hires.

“Some of their costs have gone down — for lumber, for example,” Orrenius said. “Other prices are also down significantly from where they once were, and demand is still out there.”

In January, Texas’ pace of job growth surpassed the national rate, as it has through most of the pandemic recovery.

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Nationwide, job gains in February were stronger than expected, and major stock market indexes fell 1% to 2% Friday, continuing a recent trend. For many investors, the job market’s resilience is a sign that the Federal Reserve may impose several more interest rate hikes to slow inflation. And that increases the threat of recession.

“The labor market cools from blistering to just plain hot,” Nancy Vanden Houten, lead U.S. economist for Oxford Economics, wrote in a report Friday. “The pace of job growth is still too rapid for the Fed’s liking and leaves the Fed on track to raise rates at each of the next three meetings.”

She added: There’s “a risk that more rate hikes come in the second half of the year.”

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Last month, the Dallas Fed projected that Texas would add 193,000 jobs in 2023, a net increase of 1.4% percent. After Friday’s strong jobs report and some earlier upward revisions, the Dallas Fed sharply raised its estimate on Friday.

“Now our forecast has doubled — to 2.8% growth this year,” Orrenius said.