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Dallas Fed: Growth abates in Texas manufacturing sector

January 30, 2023

DALLAS—Growth in Texas factory activity slowed in January, according to business executives responding to the Texas Manufacturing Outlook Survey.

“The manufacturing sector in Texas continues to oscillate between below-average growth and no growth, while avoiding outright contraction despite several months of declining orders,” said Emily Kerr, senior business economist at the Dallas Fed. “The employment index remains a bright spot, moving up in January and continuing to signal above-average hiring. Outlooks worsened slightly, though pessimism waned from December.”

Key takeaways from this month’s survey: 

  • The production index fell from 9.1 to 0.2, with the near-zero reading suggestive of flat output.
  • The new orders index was negative for an eighth month in a row—suggesting a continued decrease in demand—though it moved up from -11.0 to -4.0.
  • Labor market measures pointed to stronger employment growth and longer workweeks.
  • The general business activity index remained negative but shot up 12 points to -8.4.
  • The company outlook index posted its 11th straight negative reading but moved up 11 points to -2.5.

Signs of relief in labor market tightness

The Dallas Fed asked a series of special questions on labor markets in the January Texas Business Outlook Surveys and heard back from 417 business executives from Jan. 17–25.

“A majority of Texas firms continue to report they are understaffed and note that a lack of applicants is the primary hiring impediment,” Kerr said. “When asked how the availability of applicants has changed over the past month, more firms noted an improvement than a worsening for the first time since we first began asking this question in June 2021. So, we’re perhaps starting to see some signs of relief in labor market tightness.”

Other key takeaways from the special questions:

  • The share firms currently trying to hire fell to 50 percent, down from 56 percent in October and from 68 percent a year ago.
  • About 60 percent of firms continue to report they are understaffed, though the share of these firms looking to hire eased from October.
  • Lack of applicants remains the top hiring impediment, followed by workers looking for more pay than is offered.
  • Among firms noting a shortage of applicants, more report an improvement in the availability of applicants over the past month than report a worsening.

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Media contact:
Jon Prior
Federal Reserve Bank of Dallas
Phone: 214-922-6857