The Dallas Fed heard a rebound. Texas factory payrolls had not.

A survey bounce is not a hiring boom

On the last Monday in August, a Dallas Fed factory survey did what regional Fed indexes love to do: it leapt. The Texas manufacturing business index, a diffusion measure of executives’ reports on general activity, jumped to 11.6 in August from 1.3 in July. Anything above zero is expansion. The write-up talked of stronger new orders and production in a state that still makes a lot of electronics and petrochemicals. It was one month, and the Bank itself noted that uncertainty had not left the building.

The official payroll tape is less cinematic, and it is also a month behind. Seasonally adjusted state factory employment from the Bureau of Labor Statistics runs only through July 2026 in the snapshot used here. Those books do not yet include whatever August’s purchasing managers thought they saw. They do show that Texas factories employed 979,700 people in July, 5,800 fewer than in July 2025 — a 0.6 percent decline. The national factory payroll, from the Current Employment Statistics survey, was 12.61 million, down 14,000 jobs, or 0.1 percent, over the same year. Illinois, whose Chicago purchasing managers were also in the news that day, added 2,100 factory jobs, a 0.4 percent increase, to 571,000.

That is the first useful distinction. A diffusion index can turn on a handful of plants reporting better orders. A payroll count has to hire someone. Texas is still a larger factory state than Illinois by a wide margin. It is not, on the latest annual comparison, a hiring boom.

Factory payrolls since 2019: Texas held the extra jobs; Illinois and the U.S. did not

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month	texas	illinois	california	united_states
2019-01	100	100	100	100
2019-02	100.27	100.07	99.98	99.94
2019-03	100.39	99.98	99.86	99.98
2019-04	100.53	99.9	99.92	99.96
2019-05	100.76	99.61	99.95	99.91
2019-06	100.96	99.32	99.99	99.98
2019-07	101.11	99.24	99.74	100
2019-08	101.27	98.97	99.98	99.99
2019-09	101.29	98.8	99.98	99.98
2019-10	100.77	98.7	99.99	99.55
2019-11	101.27	98.48	99.96	99.9
2019-12	101.18	98.16	99.95	99.77
2020-01	101.29	98.29	100.05	99.65
2020-02	101.14	98.17	99.81	99.63
2020-03	100.92	97.99	99.35	99.17
2020-04	94.85	90.37	90.27	88.99
2020-05	95.11	91.2	92.05	90.77
2020-06	95.3	92.69	93.85	93.43
2020-07	94.61	92.88	93.19	93.61
2020-08	94.75	93.27	93.58	93.82
2020-09	94.95	93.62	93.94	94.27
2020-10	95.21	93.55	94.28	94.5
2020-11	95.36	93.39	94.34	94.75
2020-12	95.69	93.72	94.46	95.02
2021-01	95.88	93.79	94.12	94.93
2021-02	95.68	93.67	94.67	95.17
2021-03	96.36	94.13	95.1	95.61
2021-04	96.11	93.5	95.28	95.33
2021-05	96.35	93.06	95.48	95.51
2021-06	96.72	93.37	95.56	95.75
2021-07	97.37	93.49	96.04	96.21
2021-08	97.76	94.06	96.19	96.58
2021-09	97.85	93.91	96.18	96.9
2021-10	98.93	94.42	97.34	97.37
2021-11	99.47	94.94	97.83	97.72
2021-12	100.06	95.35	98.23	98.02
2022-01	100	94.94	98.51	98.23
2022-02	100.79	95.57	99.12	98.52
2022-03	101.45	95.97	99.43	99.09
2022-04	102.36	96.63	99.85	99.5
2022-05	102.8	96.36	99.94	99.57
2022-06	103.12	96.11	100.15	99.82
2022-07	104.03	97.01	100.5	100.08
2022-08	104.52	96.94	100.7	100.33
2022-09	105.01	96.94	100.67	100.46
2022-10	105.29	97.23	100.7	100.73
2022-11	105.75	97.29	100.72	100.83
2022-12	106.07	97.48	100.65	100.82
2023-01	106.23	98.29	100.65	100.88
2023-02	106.53	98.17	100.52	100.84
2023-03	106.81	97.9	100.35	100.77
2023-04	107.03	97.82	100.04	100.73
2023-05	107.41	97.83	99.86	100.62
2023-06	108.17	98.09	99.64	100.66
2023-07	107.82	97.48	98.96	100.56
2023-08	108.14	97.8	98.87	100.56
2023-09	108.37	98.05	98.99	100.64
2023-10	108.55	97.14	98.83	100.37
2023-11	108.58	97.89	98.21	100.54
2023-12	108.85	97.94	98.16	100.64
2024-01	109.27	97.94	98.24	100.66
2024-02	109.46	98.04	97.62	100.48
2024-03	109.59	98.17	97.4	100.36
2024-04	109.6	98.12	97.19	100.34
2024-05	109.72	98.17	96.91	100.27
2024-06	109.77	97.99	96.81	100.19
2024-07	109.4	97.9	96.43	100.13
2024-08	109.75	97.83	96.22	99.86
2024-09	109.84	97.8	96.1	99.75
2024-10	109.91	97.56	95.8	99.27
2024-11	110.06	97.5	95.68	99.38
2024-12	110.05	97.21	95.42	99.24
2025-01	109.98	96.58	95.31	99.09
2025-02	110.01	96.67	95.09	99.07
2025-03	110.06	96.84	94.82	99.03
2025-04	110.11	96.92	94.67	99
2025-05	110.07	96.3	94.49	98.91
2025-06	109.89	96.26	94.22	98.8
2025-07	109.81	96.24	93.91	98.71
2025-08	109.6	96.13	93.88	98.63
2025-09	109.44	95.79	93.61	98.61
2025-10	109.3	95.55	93.91	98.54
2025-11	109.2	95.4	93.74	98.46
2025-12	109.31	95.16	93.81	98.36
2026-01	108.86	96.3	93.91	98.37
2026-02	109.05	96.06	93.74	98.38
2026-03	109.08	95.94	93.53	98.5
2026-04	108.82	96.13	93.39	98.49
2026-05	108.78	96.65	93.3	98.48
2026-06	109.23	96.6	93.05	98.56
2026-07	109.16	96.6	92.95	98.6

Texas kept more of the post-2019 jobs. It did not add them this year.

Look further back and Texas still looks like the adult in the room. From January 2019 through July 2026, Texas manufacturing employment is up 9.2 percent. Illinois is down 3.4 percent. The United States is down 1.4 percent. California, still the largest factory payroll in this set at 1.20 million jobs, is down 7.1 percent from early 2019 and down another 1.0 percent over the latest year. The 2020 collapse shows up everywhere; what differs is who got the jobs back. Texas did. Most of the old industrial Midwest, in this cut, did not fully.

Over the year to July 2026, the ranking is almost the reverse of that long view. Among eleven large factory states, Ohio is the clearest gainer, up 13,200 jobs, or 2.0 percent. Georgia, Illinois and Pennsylvania are slightly positive. Wisconsin is flat. Michigan, Indiana and Texas are slightly negative. North Carolina is down 2.2 percent, New York 1.8 percent, California 1.0 percent. Size is not destiny: the two biggest payrolls here, California and Texas, both shrank a little. Ohio combined a large factory base with the only solid gain.

None of this is a verdict on August. July is July. It does mean that if the Dallas Fed’s bounce is the start of something, it had not yet walked onto the employment report. If it is a one-month mood swing, the payrolls will not have to apologize.

Over the year to July 2026, Texas factories shed jobs; Illinois added a few

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state	change_pct	change_thousands	july_2026_thousands
North Carolina	-2.16	-9.9	449.3
New York	-1.76	-7.1	397.2
California	-1.03	-12.5	1201.9
Texas	-0.59	-5.8	979.7
Indiana	-0.35	-1.8	512
Michigan	-0.2	-1.2	585.5
Wisconsin	-0.02	-0.1	458.4
Pennsylvania	0.36	2	558.1
Illinois	0.37	2.1	571
Georgia	0.45	1.9	426.3
Ohio	1.95	13.2	688.7

Bigger factory states were not the ones hiring

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state	jobs_thousands	change_pct
North Carolina	449.3	-2.16
New York	397.2	-1.76
California	1201.9	-1.03
Texas	979.7	-0.59
Indiana	512	-0.35
Michigan	585.5	-0.2
Wisconsin	458.4	-0.02
Pennsylvania	558.1	0.36
Illinois	571	0.37
Georgia	426.3	0.45
Ohio	688.7	1.95

The plants are producing more than they are staffing

Employment is the wrong ledger if the question is whether Texas factories are busy. Real manufacturing GDP — output, not headcount — tells a louder story. In 2026Q1, Texas factory output was $280.2 billion at a seasonally adjusted annual rate, in chained 2017 dollars, according to BEA quarterly state GDP. That is 32.5 percent above 2019Q1. Illinois factory output was $108.9 billion, only 3.4 percent above early 2019. The United States was 11.0 percent higher. Over the year to 2026Q1, Texas output was up 2.2 percent; Illinois and the nation were up about 4.8 percent. So Texas has the long boom; Illinois has the fresher year-over-year pulse. Neither series is a jobs report.

The mix inside Texas is the giveaway. Durable-goods output — machinery, metals, equipment — was $119.6 billion in 2026Q1. Nondurables — chemicals, refining, plastics and the rest of the short-lived pile — were $159.3 billion. Those chained-dollar pieces should not be added; they can be compared. After 2021 the nondurable line pulled away. Chemical manufacturing alone, on the annual books, rose from $47.1 billion in 2015 to $71.5 billion in 2024. That is the Gulf Coast showing up in the national accounts: more stuff per worker, and a lot of it measured in tanks rather than assembly lines.

Hours fit the same picture. Average weekly hours of all Texas manufacturing employees, not seasonally adjusted, were 42.5 in July 2026, down from 43.1 in July 2025 and a touch below 42.9 in July 2019. The workweek did not lengthen into a boom. Combined with a slightly smaller payroll, that is not a portrait of plants running extra shifts to keep up with a sudden August rush — at least not yet.

Texas factory output ran far ahead of the payroll

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quarter	texas	illinois	united_states
2019Q1	100	100	100
2019Q2	97.69	100	100.64
2019Q3	97.5	99.22	101.49
2019Q4	95.69	96.36	101.08
2020Q1	91.49	93.9	98.52
2020Q2	83.91	85.8	88.88
2020Q3	91.16	96.31	99.26
2020Q4	96.79	98.44	101.25
2021Q1	99.46	101.34	102.61
2021Q2	103.23	103.65	103.91
2021Q3	108	101.48	103.68
2021Q4	115.67	101.23	106.61
2022Q1	112.07	102.07	104.47
2022Q2	110.66	97.98	103.04
2022Q3	112.06	97.76	102.77
2022Q4	111.73	101.01	103.06
2023Q1	114.97	94.41	100.79
2023Q2	115.13	96.71	102.55
2023Q3	118.66	101.1	105.29
2023Q4	121.84	102.83	106.77
2024Q1	123.11	100.68	104.85
2024Q2	129.61	101.67	107.33
2024Q3	133.18	102.73	108.24
2024Q4	134.44	98.3	107.54
2025Q1	129.7	98.63	105.91
2025Q2	134.02	101.68	108.97
2025Q3	134.62	102.86	110.31
2025Q4	132.73	101.12	109.13
2026Q1	132.54	103.38	110.96

The Texas factory boom is a nondurable-goods story

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quarter	durable	nondurable
2015Q1	100260.9	102361
2015Q2	95469.9	97794.1
2015Q3	94869.3	102137.8
2015Q4	94809.5	107096
2016Q1	95268	93602.6
2016Q2	95321.3	99573.2
2016Q3	96573.7	100401.7
2016Q4	95465.8	95877.5
2017Q1	96570.1	99154
2017Q2	96242.6	98172.6
2017Q3	99516.9	98337.4
2017Q4	103031.2	104329.1
2018Q1	108031.1	111650.4
2018Q2	108842.3	114130.2
2018Q3	107936.6	115699.8
2018Q4	107607.2	115693.1
2019Q1	104267.8	107093.9
2019Q2	103015.6	103550.5
2019Q3	102975	103234.7
2019Q4	101935.3	100427.2
2020Q1	100874.5	92199.3
2020Q2	88807.6	88531
2020Q3	96062.1	96718
2020Q4	100349	104748.9
2021Q1	103288.5	107561.1
2021Q2	102164.1	116502.4
2021Q3	102641.1	125572.2
2021Q4	106077.2	137513.2
2022Q1	107372.4	129375.3
2022Q2	107493.6	126470.7
2022Q3	106975.2	129414.9
2022Q4	108745.3	127473.4
2023Q1	109245	133330.8
2023Q2	110094.7	132933.6
2023Q3	113611.7	136797
2023Q4	113073.9	143607.7
2024Q1	109702	149364.1
2024Q2	113507.8	159157.7
2024Q3	114519	165648.8
2024Q4	115384.8	167425.7
2025Q1	112232.3	160578.5
2025Q2	114503.6	167444.8
2025Q3	117507.4	165667.7
2025Q4	117562.9	161645.4
2026Q1	119552.5	159265.5

Illinois is more of a factory state than the job count suggests

Raw payrolls make Texas look like the factory heavyweight, and it is: 979,700 manufacturing jobs against Illinois’s 571,000. Share of the local economy is a different ranking. Manufacturing was 6.8 percent of Texas nonfarm employment in July 2026 and 9.2 percent of Illinois’s. Illinois, with a much smaller overall job base (6.18 million nonfarm jobs versus 14.47 million in Texas), still leans harder on the shop floor. That is why a Chicago-area factory survey can rattle a state even when the national tape barely moves.

The practical reading for anyone who heard “Texas factories are back” on August 31 is narrower. Through July, Texas had more factory jobs than before the pandemic, a smaller slice of its own booming job market, a workweek that was not stretching, and an output boom concentrated in nondurables. Illinois had fewer factory jobs than in 2019, a slightly better year-over-year hire, and output that had barely beaten its old level. The Dallas Fed may yet be right about August. The Bureau of Labor Statistics had not been asked that question. When the next payroll print arrives, the test is simple: did Texas actually hire, or did the diffusion index just have a good month?