Houston Economic Indicators

October 27, 2026

Houston’s labor market slowed in the third quarter. Employment contracted slightly from June through September, and local employment growth was weaker than the state and nation. Despite little job growth, unemployment fell over the same time. Due to near-zero labor force growth, an improvement in the unemployment rate may not be matched by improved job gains. Real wages rose in the third quarter but fell year over year as inflation outpaced nominal wage increases. From July through October, prices for gasoline and diesel trended up.

Labor market

Labor market slows with few pockets of strength

Houston payrolls contracted slightly over the third quarter, declining an annualized 0.4 percent (-3,800 jobs).

The only sectors that grew from June through September were professional and business services and construction. Construction grew an annualized 2.7 percent (1,800) over the three months ending in September. Professional and business services edged up 1.4 percent annualized (1,900). Employment in all other sectors fell with the fastest decline in information and other services which dipped an annualized 3.0 percent (-1,200) from June through September (Chart 1).

Year over year, job growth was meager, ticking up just 0.3 percent (9,000 jobs) from September 2025 to September 2026. Over the past year, strong job growth was constrained to construction, professional and business services, and government. Employment in construction rose 3.8 percent (9,800) year over year while professional and business services grew 1.0 percent (5,600). Oil and gas contracted 1.9 percent (-1,400) year over year, and leisure and hospitality declined 1.4 percent (-5,200). Most other sectors were flat.

Houston’s labor market is slightly weaker than state and nation

Houston’s 0.4 percent annualized employment decline in the third quarter lags Texas and the nation. In the third quarter, state payrolls expanded an annualized 0.2 percent while national payrolls rose 0.4 percent (Chart 2).

Unemployment declines in third quarter

The Houston unemployment rate declined to 4.5 percent in September from 4.9 percent in June (Chart 3). A decline in the number of unemployed drove the unemployment rate lower in the third quarter. From June through September, the number of unemployed fell 7.7 percent while the labor force was essentially flat growing 0.5 percent. Unemployment rates in Texas and the U.S. were unchanged from June through September.

Real earnings rise in third quarter

Average hourly earnings in Houston were $36.75 per hour in September, up slightly from $36.61 in June after adjusting for inflation and seasonality (Chart 4). Year over year, real earnings fell 1.9 percent.

Houstonians’ real hourly earnings in September were below the national average of $37.57 per hour. Real earnings in both Houston and the nation tend to be higher than the state overall. Texas’ real hourly earnings in December were $36.47.

Unadjusted for inflation, wages rose 1.7 percent year over year to $36.99 per hour in September, as shown in the summary table.

Fuel prices

The average retail price of gasoline in Houston increased to $3.71 per gallon the week of October 19 from $3.58 the week of July 20 (Chart 5). Over the same period, the average price of U.S. Gulf Coast on-highway diesel climbed to $5.90 from $4.94.

Global shortages of middle distillates (mainly diesel and jet fuel) are driving diesel prices higher relative to gasoline. Unplanned refinery outages and geopolitical strife around the world have driven a wedge between fuel and crude oil prices. Texas oil and gas producers broadly think this problem could persist to some extent for more than a year.

NOTE: Data may not match previously published numbers due to revisions.

About Houston Economic Indicators

Questions or suggestions can be addressed to Robert Leigh. Houston Economic Indicators publishes bimonthly after state and metro area employment data are released.