Texas Economy Slows Amid Rising Uncertainty, Fed Warns

The latest outlook from the Federal Reserve Bank of Dallas casts a cautious shadow over the Lone Star State’s economic prospects. The Dallas Fed reports that while employment is expected to rise in 2025, the pace—around 1.7 percent—falls noticeably short of the state’s long-term average of approximately 2 percent.
Within the survey data, local business leaders highlight growing concerns about tariff uncertainties, regulatory changes, and lingering macroeconomic headwinds. These crosswinds are clouding operational and expansion plans. One respondent remarked that planning amid such an unpredictable trade environment felt nearly impossible.

Regional economic activity underscores a softness across key sectors. Manufacturing and service industries both show signs of cooling—broader indicators suggest growth has come in beneath historical trends. Notably, activity in service-related businesses continues to contract, signaling that consumer and enterprise demand may be weakening.

Other signs also point to moderation. In June, multifamily construction values rose by just 4 percent, a slowdown from 7 percent in the previous month, while permits ticked up only modestly—up 1 percent after soaring earlier in the year. These data points reflect a real-time deceleration in real estate dynamics.

Job growth—while still positive—is also uneven across the state. Some metros, particularly those rooted in white-collar services, like Dallas and Austin, are underperforming relative to historically stronger areas. Meanwhile, sectors such as energy, financial services, and construction have continued to show resilience, though their pace of expansion appears to be diminishing.

Compounding the situation, broader uncertainty persists over trade policy direction, looming tariffs, and geopolitical pressures—raising concerns about investment volatility and capital deployment in the region. Many executives surveyed continue to express optimism that potential deregulation or tax changes could offer relief, but the consensus remains one of guarded caution.

In short, Texas continues to grow—but at a pace below its potential. With employment gains lagging behind historical norms, construction activity cooling, and business outlooks clouded by uncertainty, the Dallas Fed cautions that the state’s economy may be entering a more subdued phase in the months ahead.