Texas’ economy may be slogging through a slowdown now. Still, it’s on track to finish 2026 on a strong note, according to economist Ray Perryman, president and CEO of The Perryman Group, speaking at the Austin Chamber of Commerce’s Economic Outlook 2026 event.
Perryman said the next few months will be “tough sledding,” but he expects conditions to improve, with clearer momentum by mid- to late-2026 gradually. A key factor will be how the effects of the Trump administration’s tariff policies play out. He anticipates that some tariffs will remain in place in the long term. In contrast, others may be dropped, giving businesses more clarity to plan.
Despite short-term headwinds, Perryman pointed to strong fundamentals in the Texas economy, including:
- Ongoing job growth
- Expanding sectors like life sciences, advanced research, financial services, advanced manufacturing, and energy
These, he said, position Texas well for renewed growth once the broader slowdown eases.
However, he warned that labor shortages will continue to be a structural challenge. With too few births to meet long-term workforce needs, Perryman argued that immigration will be critical to filling roles in fields such as hospitality, construction, and technology:
“We have a structural workforce shortage. We’re going to need immigration to solve it.”
He also flagged water and power as major long-term constraints. Growing data center activity is driving up power demand, while aging water infrastructure and rising usage are straining water systems. Texas voters recently approved $20 billion for water infrastructure over the next two decades; however, estimates from the policy group Texas 2036 suggest that it could take at least $154 billion to address the state’s water needs. Perryman said private-sector investment will have to play a big role.
For business owners facing uncertainty in 2026, Perryman advised against remaining stagnant. Instead, he urged them to invest in better data, track information relevant to their industries closely, and make well-grounded, calculated decisions, even if some broader trends have to “play out.”