WESLACO, Texas - Senior business economist in the San Antonio branch of the Federal Reserve Bank of Dallas, Luis Torres, gave an in-depth presentation to RioPlex recently.
The event happened at South Texas College's Mid-Valley campus in Weslaco.
The presentation titled: "Regional Economic Update: The Twists and Turns of 2025 and a Look Ahead" focused on the Texas economy's slight decline last year and a possible increase in this year's economy.
Here is a slideshow presentation of the report Torres gave to RioPlex:
Torres stated that Texas job growth descended to zero in 2025. Texas was considered in the top three states for annual construction values for data centers in the U.S. according to Dodge Construction.In his overview, Torres said:
“Texas’ economy slowed sharply in 2025. Output growth was below average, and job growth was zero at best.
“Higher tariffs, falling immigration, federal government cutbacks and widespread policy uncertainty contributed to lower growth.
“Texas also contended with job losses in energy and high-tech and a downturn in residential construction.”
Torres said the outlook for 2026 calls for a slight pickup in growth.
“Momentum in AI investment and data center construction will carry forward. Fiscal policy will add to growth, as will easier financial conditions and deregulation.”
Torres said the FIFA World Cup in 2026 will also help.
“Headwinds include labor supply constraints, residential housing markets, low oil prices, and cuts to safety net programs.”
He said the outcome of USMA renegotiation is pivotal for Texas.
Torres presented on the state's condition in construction and real estate. According to Torres, home sales in Brownsville and McAllen continued to increase throughout 2025. However, McAllen's home sales of residential units showed an increase in Nov. 2025, compared to Brownsville's sales which stayed at a stable rate. According to Zillow, apartment rates in large Texas cities such as Austin, San Antonio and Houston are decreasing.Stated by Torres, crude oil and natural gas production decreased Oct. 2025. Torres also presented on national trade and imports. According to the economist, USMCA compliance provided for a strong increase in order to avoid higher tariffs.
When presenting on AI, Torres reported that two-thirds of Texas businesses are currently using AI. Of those using AI, 76% of businesses reported it did not affect their need for employees. However, a quarter expect to decrease their need for employees in the future with AI.
Texas businesses saw a deceleration in wage and price growth in Dec. 2025 after seeing an increase in September, according to Torres. Firms' primary concern in 2026 is 'demand.'"
According to Torres, the state's employment forecast is hovering around 1% for 2026. He predicts job growth this year will mildly resume.
Torres said Texas grew in 2025 without adding any new jobs on net. He said this has not happened since the jobless recovery of 2002-2003.
“Despite this, there is light sign of broad-based labor market slack, and the headline unemployment rate is low and stable.”
Torres said job growth should resume in 2026, but it will be mild.
“Productivity gains are keeping labor demand in check, while the immigration crackdown is keeping labor supply limited.”
“A continuing AI book and OBBBA tax provisions will likely boost activity, while low oil prices and a residential construction bust (will be a) drag on growth.
“Other concerns that bear watching include safety net cuts and federal funding reductions, especially to health care and eduction, which is where Texas lags other large states.”
Editor's Note: Reporter Steve Taylor contributed to this story from McAllen.
