Senator Eliot Shapleigh - El Paso, Texas

Texas could lose nearly 300,000 jobs this year and see its unemployment rate reach about 8 percent, according to an updated estimate by the Federal Reserve Bank of Dallas.

"Unfortunately, it looks like it's going to be pretty sharp based on the leading indicators," said Keith Phillips, a Dallas Fed economist who is based in San Antonio, referring to the employment decline he is forecasting.

If Phillips is right – and many economists aren't convinced – Texas would be in for a much more painful year than expected.

The state was already losing jobs in late 2008, and analysts say additional cuts are likely across a wide range of industries. Some sectors stand out as more vulnerable than others.

"Clearly, the construction industry and the oil and gas sector are going to take some big hits, and finance," said Waco economist Ray Perryman.

The 296,000 job losses Phillips is forecasting for this year would mean a 2.8 percent decline in Texas payroll employment between December 2008 and December 2009 – the fastest rate of job loss since 1986.

That would be an even swifter rate of decline than the 2.2 percent fall in employment in 2008 for the U.S. economy as a whole, which lost nearly 3 million jobs last year.

Dana Johnson, chief economist at Dallas-based Comerica Inc., estimates that the U.S. economy could see another 2.2 percent fall in employment this year, with a somewhat smaller decline for Texas.

"Broadly speaking, I think Texas is going to perform about the same or a little bit better than the U.S. economy," Johnson said. "In the U.S., I think we'll have some pretty gargantuan losses in the beginning of the year, and then I think things will get a little bit better."

Economic uncertainty

Texas added jobs during most of 2008. The unemployment rate was 6 percent in December, more than a percentage point below the national average.

But the Texas labor market weakened in the second half of the year. Now economists are trying to divine the state's economic future amid mind-bending uncertainty in the U.S. and the rest of the world.

At the Dallas Fed, Phillips' forecasts have been getting gloomier as the economy continues to weaken.

Late last year, he was forecasting a 1.5 percent decline in Texas jobs during 2009. In January, he was forecasting a 2.2 percent decline for this year.

Now he sees Texas losing jobs at the highest rate since the bust of the 1980s, when the job base shrank by more than 3 percent in 1986.

"With the deepening of the financial crisis, the weakening energy sector and the fall in exports to the world economy, Texas has been dragged into the recession," he said.

Still, Phillips' forecast is significantly bleaker than those of other analysts.

Texas Comptroller Susan Combs predicted earlier this year that the state could lose 111,000 jobs during the first half of the year, with the negative trend reversing toward the end of the year.

"There are different calculations out there," said R.J. DeSilva, a spokesman for Combs. "We came up with ours based on national projections and what we've seen in terms of certain sectors in the economy."

Ana Orozco, an economist with IHS Global Insight, an economic research and forecasting firm, doesn't have a prediction for December 2009 alone. But she says Texas employment during the last three months of 2009 could be about 1.7 percent below its level in the last three months of 2008.

Significant revisions

Perryman, the Waco economist, said last month that he anticipated a "pretty dismal" first half of 2009, adding that job growth later in the year would give the state a modest net gain on the year as a whole.

Now he says he wants to review potentially significant revisions to 2008 jobs data, which are scheduled for release Thursday.

"They could have a material effect on everyone's projections," he said. "It will give us a sense of some of the patterns and trends we're in right now."

Phillips said the Dallas Fed's Texas Leading Index, which is designed to shed light on the future of the state economy, has been in a nose dive recently.

The index tracks initial jobless claims; a help-wanted index; average weekly hours worked in manufacturing; oil prices; oil and gas well permits; an index of Texas stocks; a trade-weighted value of the dollar; and a U.S. economic index.

"We had a lot of positive factors beginning last year that helped us have pretty good job growth," Phillips said, pointing to higher energy prices, strong exports and a relatively healthy tech sector.

"All those things kind of changed in the second half of the year," he said. "After September, the financial crisis really spread to all regions."