Eleventh District Beige Book – Dallasfed.org


September 7, 2022

Economic Activity Summary

Growth in the Eleventh District’s economy has continued at a modest pace, although job growth has been quite robust. Activity in the manufacturing and service sectors continued to slow, growing at a slower pace than at the start of the year. Retail sales were flat or down, and home sales remained relatively subdued. Loan demand continued to grow, but at a much slower pace. Local nonprofits have reported increased demand for rent and food assistance amid rising costs. The energy sector expanded further as persistent drought led to a significant decline in agricultural production and the slaughter of herds. Wage growth remained very high due to a tight labor market. Supply chain bottlenecks have started to ease and prices have not risen as quickly, although inflation is still high. The outlook was mixed as uncertainty remained high and contacts expressed concern about slowing demand and the risk of recession resulting from high prices, weakening consumer confidence and rising interest rates. interest.

Labor markets

Strong employment growth continued, although the supply of workers remained tight. Of the 367 Texas business executives who responded to a Dallas Fed survey in July, 62% were trying to hire and a large majority cited a lack of candidates as a barrier. Labor shortages were particularly acute in the manufacturing sector, where one contact said they had the highest vacancy rates in recent history and another noted that the labor pool work looked more like “a labor puddle”. Transportation service companies are experiencing shortages of drivers and pilots. Oil and gas companies have noted widespread hiring, but also significant difficulty finding qualified candidates.

Wage growth remained high as companies tried to attract and retain employees despite the labor shortage. Of Texas companies trying to hire, more than half said workers seeking higher wages than offered were a barrier. Employment agencies, in particular, described a wide gap between what employers were willing to pay and the wages job seekers expected. Contacts noted high turnover in low-skilled positions and openings at higher pay rates. Others said they had to pay hefty premiums to attract talent.


While input costs and selling prices continued to climb, the pace slowed slightly, especially for manufacturing raw materials. Price declines were observed for certain metals such as aluminum and copper. Overall, supply chain shortages remained the main driver of rising input costs, although there has been some easing over the past six weeks. High fuel prices have also pushed up costs for the majority of businesses. Most contacts report passing on at least some of their higher costs to customers through higher prices, although only about 10% were able to pass on all of them. Airfare prices have risen and contacts expect them to remain high amid ongoing labor shortages and high input costs. Looking ahead, price increases are expected to moderate over the next six months, but remain at historically high levels.


Manufacturing activity in Texas increased slightly over the review period. Output growth was led by the manufacture of durable goods such as computers and automobiles. However, overall manufacturing demand declined, with slightly more companies noting a decrease in new order volumes in August than an increase. While a majority of manufacturers continued to experience supply chain disruptions, some say the severity has diminished. The decline in orders combined with the resolution of supply problems has enabled companies to manage backlogs and reduce delivery times. Petrochemical companies reported strong activity despite some logistical issues, and refineries were operating at near-maximum utilization with very healthy margins. The overall manufacturing outlook was mixed, with some contacts losing confidence amid weaker demand.

Retail sales

Retail sales have been flat or down for the past six weeks, with some contacts citing customer pushback over the price hike. A general improvement in supply chain disruptions has been seen and stocks have started to rebuild. A car dealership expects a slow increase in the availability of new vehicles over the next year, which will put downward pressure on prices. The overall outlook was for sales to increase six months from now, although expectations for general business activity were less optimistic.

Non-financial services

The services sector continued to grow moderately during the review period. Revenue growth was mostly broad-based, with continued solid increases in the transportation sector. Airlines reported strong demand despite high ticket prices and said leisure travel had mostly recovered to pre-pandemic levels, while business travel lagged. Cargo volumes passing through Texas seaports have seen record growth. Recruitment firms continued to report very strong demand, particularly for permanent placements of professionals. The outlook for the services sector was mostly neutral amid heightened uncertainty about future business conditions.

Construction and Real Estate

Housing market activity remained weak, particularly at the entry level. Sales fell noticeably in July, but improved in August in part due to lower mortgage rates. House prices were stable or falling and incentives were becoming more widespread. The outlook was uncertain, with contacts expecting further weakness to come. Apartment rental was strong and in line with pre-COVID levels, although momentum slowed from its 2021 highs. Occupancy was flat to declining and rent growth remained high, but slowed. decreased from its previous febrile rhythm. Demand for office space was mixed and construction subdued, while leasing and industrial construction remained strong.

Financial services

Loan demand continued to grow, but at a significantly slower pace than seen over the past 18 months. Growth in total loan volume also declined, with mixed movements by loan type. Residential real estate loan volumes have declined over the past six weeks after stabilizing earlier this year amid higher mortgage rates. Consumer, commercial and industrial loan volumes were largely flat, while commercial real estate loan volumes continued to increase. Loan defaults increased for consumer loans, but continued to decline for other types of loans, resulting in little change in overall nonperforming loans. In the coming six months, contacts continue to expect loan demand and general business activity to decline, and delinquent loans to increase, although the outlook is somewhat less pessimistic than there was. at six weeks.


Oil and gas activity has increased, with the number of rigs in the Eleventh District increasing and contacts noting strong demand for oil services. Labor and supply chain challenges continued to hamper the pace of increased drilling and well completions. Delivery times for new oil equipment have lengthened further. The outlook was quite good as companies seem confident that prices will remain high enough to support continued growth in oil and gas activity.


Overall, drought conditions have improved slightly over the past six weeks, with some areas receiving significant rainfall in late August. Many row crops were experiencing a high dropout rate and low yields, which led to a significant drop in production this year, especially for cotton. High input costs and low production will put financial pressure on many growers. Severe drought and higher feed costs led to large cattle herd slaughters.

Community insights

The nonprofits have reported an increase in demand for services among the communities they serve over the past six weeks. Inquiries about rent and food assistance increased, and contacts noted that high inflation was straining household budgets. Housing costs have become a major concern for low-income residents, due to an insufficient stock of affordable housing, rapid rent increases, and the end of state and federal assistance programs. Evictions increased and an increase in homelessness for the first time was noted. Community colleges have reported an increase in enrollment, although female student enrollment has not rebounded as quickly as male enrollment.


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