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Texas Service Sector Growth Continues in August, According to Dallas Fed Survey

For immediate release: August 26, 2014

Affordable Care Act Raising Health Care Costs For Texas Service Sector Businesses, According To Supplemental Questions

DALLASTexas service sector activity expanded in August, according to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey.

The TSSOS revenue index—a key measure of state service sector conditions—was unchanged from last month at 21, indicating activity increased at the same pace as in July.

The survey is conducted monthly by the Dallas Fed to obtain a timely assessment of activity in the state’s service sector, which represents almost 70 percent of the state economy and employs close to 7.6 million workers.

Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

Labor market indicators reflected faster employment growth and longer workweeks. The employment index advanced further into positive territory, and the hours worked index remained positive.

Perceptions of broader economic conditions continued to reflect optimism in August. The general business activity index was similar to last month at 22.8.

Indexes of future service sector activity remained in solid positive territory this month.

TSSOS also includes a component called the Texas Retail Outlook Survey, which uses information from respondents in the retail and wholesale sectors only.

Retail sales climbed again in August, according to business executives responding to the Texas Retail Outlook Survey. However, the sales index inched down from 22 in July to 20.6 in August, suggesting slightly slower growth.

Indexes of future retail sector activity remained in positive territory this month.

For this month's survey, respondents were asked supplemental questions on health care costs and the impact of the Affordable Care Act (ACA). The median business executive responding to the supplemental survey estimated its health care costs per worker in 2014 to be 10 percent higher than in 2013, and expects a 12 percent increase next year. Most business executives said the ACA has contributed to the rise in these costs.

Fifty-two percent of respondents said they were making modifications to their health care plan in response to the ACA. Twenty-one percent of business executives are lowering (or lowered) the number of workers they employ because of the effects of the ACA, and 25 percent said they are raising (or raised) the prices they charge to customers because of the ACA.

Full results to the supplemental survey questions can be found along with the August Texas Service Sector Outlook Survey report.

The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity.

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Media contact:
Justin Jones
Federal Reserve Bank of Dallas
Phone: 214-922-5449
Email: justin.jones@dal.frb.org