Texas Economic Outlook: Experts predict 2025 growth to be on par with 2024

DALLAS - The Texas employment forecast has softened slightly for 2025. But overall, the state’s economy is strong and on a solid foundation.

That’s according to the Dallas Federal Reserve’s latest economic outlook for the state.

Texas Economic Outlook

What they're saying:

Pia Orrenius, a senior economist for the Dallas Fed, told business and community leaders on Friday that the Texas economy will continue to grow at about the same pace as last year.

"And the reason for that is we’re balancing some optimism around what’s promising to be some deregulatory changes, so deregulation and also some tax cuts that business leaders are expecting. But we have to balance that against the likelihood of higher tariffs, also sharply lower immigration and some cuts perhaps in government spending," she said.

But Orrenius said the biggest potential negative growth factor could be tariffs.

"Especially tariffs on our biggest trading partner, Mexico. Those would be detrimental to Texas because we are the No. 1 exporting state in the nation and Mexico is basically our No. 1 partner for trade," she said.

Texas Job Growth

What we know:

Jobs in all sectors grew last year, but not at the same rate as in 2023.

That’s concerning for small and mid-sized businesses.

"They’re having a hard time attracting the workers that they need. So, almost half of all businesses in our recent report reported not being able to hire workers. And this is especially important in skill, in skill sand trades, you know, manufacturing, in transportation, construction," said Jeff Burdett, the state director for the National Federation of Independent Businesses.

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US economy added 143,000 jobs in January, below expectations

The U.S. economy added jobs at a slower pace than expected in January, as the Federal Reserve remains in a holding pattern for interest rate cuts as it evaluates the labor market and inflation data.

Higher interest rates, falling gas and oil prices, and election uncertainty influenced hiring and investment decisions last year.

The good news is that inflation is lower in Texas than in the rest of the country.

"We were surprised to see that actually prices adjusted faster here last year than they did in the US," Orrenius said.

A Softened Economy

Big picture view:

While the state’s economy has softened a bit, Orrenius sees nothing in the forecast to stop it.

"We experience changing conditions. Even if it’s innovation or business formation, everything is a little bit more intense here. We’re a little bit closer to the growth," she said.

She called the Texas economy the greatest of all 50 states and said the reason why is because flexibility is built into it. It’s also market-driven and regulations are out of the way so businesses can grow.