Data Centers and Local Labor Markets: Evidence from the Texas Experience

This study provides a causal analysis of the impact of data center expansion on local labor markets in Texas from 2000 through 2024. Using a panel of 254 counties, we employ staggered Difference- in-Differences (DiD) and event study frameworks, supplemented by Callaway and Sant’Anna (2021) diagnostics, to estimate the effects of these capital investments on employment growth. While traditional input-output (I-O) models often project significant job multipliers, our causal estimates find that data centers experience negligible long-term increases in labor demand. We find no statistically significant impacts to employment growth in Information (NAICS 51) or Professional and Technical Services (NAICS 54) sectors beyond a transient, pre-operational pulse and only a short-term increase in Construction (NAICS 23) employment growth following treatment. Furthermore, neither large nor small data centers appear to act as anchors for high-tech employment clusters, likely due to the proximity-agnostic nature of AI training workloads. Given that Texas tax incentives for these facilities are projected to cost $9 billion by 2030, our findings suggest that such fiscal outlays are an inefficient mechanism for local job creation.