Texas’ labor market is showing signs of cooling, with employment growth slowing below historical averages even as Mining and Logging, Manufacturing and Professional Services continue to expand. These indicators raise new questions about the state’s economic outlook heading into the final months of 2026.

The statewide unemployment rate stood at 4.4% in September, while total nonfarm employment reached 14.46 million jobs, according to the U.S. Bureau of Labor Statistics. According to Luis Torres, Dallas Fed senior business economist, "Texas employment declined in September, slowing year-to-date job growth to 0.8 percent, well below the state’s long-running average of 2 percent." The figures paint a picture of an economy that continues to create opportunities but is expanding at a more measured pace than previous periods of rapid growth. A recent WalletHub study ranked the state eighth overall for job seekers, including second place for economic environment and monthly starting salaries.

Professional and business services remain a bright spot, recording annual growth of 3.3% as corporate operations and engineering services expand. Construction and mining also continue to post gains, growing at annual rates of 1.7% and 1.5%, respectively.

Manufacturing is expanding more moderately. The Dallas Fed’s October 2026 production index eased to 15.8, indicating continued growth in factory output but at a slower pace than earlier in the year. The technology sector faces greater headwinds, with information-sector employment down 3.9% year over year amid corporate restructuring and changes in software-industry hiring (though an improvement from August 2026’s -5.3% reading).

The slowdown is unfolding a bit unevenly across Texas’ major metropolitan economies.

DFW recorded annual job growth of about 1%, supported by Mining and Construction, although employment has recently eased in that area, along with Education and Health Services, Leisure and Hospitality, and Government. Houston also posted nonfarm growth of approximately 1%, with international shipping through the Port of Houston complementing a positive 5.4% YOY change in construction.

Austin recorded growth of roughly 1.1%, a slower pace than during its recent tech boom. Semiconductor research and development and advanced manufacturing projects continue to support the regional economy, but Mining, Logging, and Construction led growth with a 4.5% YOY increase. San Antonio’s annual growth trailed at 0.4% YOY (total nonfarm).

As 2026 draws to a close, employers and policymakers are watching upcoming employment reports for signs of stabilization or further weakness. For Texas companies, the ability to manage costs, secure talent and identify opportunities in an increasingly uneven labor market will determine the future.