A New Mexico Perspective: “Momentum builds in Texas Economy”

New Mexico’s unemployment rate held steady in July, but the latest employment report shows a labor market moving differently from neighboring Texas, where stronger hiring is beginning to create its own pressures.

New Mexico’s seasonally adjusted unemployment rate remained at 4.8 percent in July, unchanged from June but above the 4.0 percent recorded in July 2025, according to the New Mexico Department of Workforce Solutions. The national unemployment rate was 4.1 percent.

At the same time, New Mexico added 6,700 nonagricultural payroll jobs over the year, an increase of 0.8 percent. Private-sector employment accounted for 6,000 of those jobs, while public-sector employment declined by 700.

Where New Mexico is adding jobs

The statewide number masks some substantial differences among industries.

Mining and construction employment increased by 1,800 jobs, including 1,100 additional mining jobs. Private education and health services added 3,200 jobs, while trade, transportation and utilities gained 3,100. Leisure and hospitality employment increased by another 1,500 jobs.

Those gains were partially offset by declines elsewhere. Professional and business services lost 2,400 jobs over the year, while financial activities, information and other services also declined.

One of the largest changes occurred in government employment. State government and local government each added 1,500 jobs, but federal government employment fell by 2,300 jobs, or 8 percent, compared with July 2025.

The Department of Workforce Solutions is scheduled to provide additional analysis in its Labor Market Review on Aug. 28.

Across the state line, a different labor-market story

Those New Mexico numbers provide useful context for a new analysis from economists Laila Assanie and Robert Leigh at the Federal Reserve Bank of Dallas, who examine an accelerating Texas economy and the consequences beginning to accompany that growth.

Their Aug. 17 report, “Momentum builds in the Texas economy; wage pressures broaden,” finds Texas employment grew at a 2.4 percent annualized rate during the second quarter, accelerating from 1.5 percent during the first quarter.

For the first half of 2026, Texas employment expanded at a 1.9 percent annualized pace—roughly matching the state’s long-term average and again giving Texas about a percentage-point employment-growth advantage over the nation.

Perhaps more interesting than the headline growth is where some of it is occurring.

Staffing-services payrolls increased at a 22 percent annualized rate during the first half of the year, representing approximately 32,000 jobs. Because temporary employment can respond quickly to changing business conditions, the Dallas Fed notes that staffing employment can serve as a leading indicator of broader economic activity.

In this case, businesses told Dallas Fed researchers that temporary workers increasingly are being used not simply because employers remain reluctant to make permanent hires, but because companies are having difficulty finding workers.

Growth begins running into the available workforce

Texas’ unemployment rate remained relatively low at 4.4 percent in June, but its labor force contracted at a 0.7 percent annualized rate during the first half of 2026. That contrasts with labor-force growth of 1.2 percent during the same period last year.

At the same time, construction associated with Texas’ data-center boom is increasing competition for skilled trades, including electricians and concrete workers. Dallas Fed business contacts reported companies competing—and sometimes aggressively—for workers who are already employed elsewhere.

Changes in the availability of immigrant labor are adding another constraint. In a July Dallas Fed survey, 14 percent of responding firms said immigration-policy changes during the previous year had affected their ability to hire or retain foreign-born workers. Some of those businesses reported responding with greater reliance on contractors, subcontractors and outsourced labor.

The result is an unusual combination: stronger economic growth alongside an increasingly constrained supply of workers.

And wages are beginning to respond

Average annual wage growth among businesses surveyed by the Dallas Fed accelerated from 3.5 percent in March to 4 percent in June.

Manufacturers reported wage growth of 4.8 percent over the previous year, while service-sector wage growth increased to 3.8 percent after previously trending downward.

The Dallas Fed’s findings suggest the wage pressure is no longer isolated to manufacturing. Businesses across sectors increasingly report competition for skilled workers, while employees themselves are seeking higher compensation in response to fuel costs and broader inflation.

That creates another question for the regional economy: how much of those higher labor costs eventually reaches consumers?

Inflation is increasingly a concern—but not yet an expectation

Nearly half of Texas businesses surveyed by the Dallas Fed in June ranked inflation among their three largest concerns, the highest share since the question was introduced in 2022.

Yet their actual expectations for future prices have remained comparatively stable.

Businesses expected their input costs to rise an average of 3.7 percent during the coming 12 months and selling prices to increase 2.8 percent. Those expectations were at or slightly below what businesses anticipated in March.

Assanie and Leigh describe the distinction as businesses increasingly treating inflation as a risk to watch rather than something already incorporated into future pricing plans.

That distinction could become important well beyond Texas.

Why the Dallas Fed report is worth reading from New Mexico

The two reports don’t provide an apples-to-apples comparison. New Mexico’s monthly employment release describes what has already happened within the state’s labor market, while the Dallas Fed analysis combines employment data with surveys and business contacts to examine what may be developing underneath the headline numbers.

Read together, however, they raise useful questions for New Mexico.

New Mexico is still adding jobs even while its unemployment rate sits above both its year-ago level and the national rate. Texas, meanwhile, is experiencing faster employment growth but increasingly confronting labor availability, wage pressure and inflation concerns that can accompany a tightening market.

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The Dallas Fed has increased its forecast for Texas employment growth in 2026 to 2 percent, up from 1.1 percent at the beginning of the year. Its economists will now be watching whether the surge in temporary employment becomes permanent hiring, whether shortages of skilled workers persist and whether tariffs and other disruptions eventually change business investment or pricing decisions.

For New Mexico readers, those are useful indicators to watch on the other side of the state line—and useful context as New Mexico’s own employment picture continues to develop.