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Reports on Regional Economic Activity

Eleventh District Beige Book

Summary of economic activity

Growth in the Eleventh District economy continued at a modest pace overall. Expansion in manufacturing activity picked up a bit while service sector expansion eased slightly. Retail and home sales fell. Loan demand declined for the first time in nearly two years, amid rising interest rates. The energy sector continued to expand but growth was constrained by equipment and labor shortages. Local nonprofits reported increased demand for assistance as household costs rose. Drought conditions eased but the relief came too late in the growing season for row crop producers. Solid employment growth continued, though some contacts reported a hiring slowdown. Wage growth remained elevated but eased slightly. Selling price growth eased slightly as well, amid reports of greater difficulty passing on cost increases to customers. Outlooks were generally pessimistic outside of the energy industry, and uncertainty remained elevated. Contacts primarily voiced concern about inflation, labor shortages, and weakening demand.

Labor markets

Solid employment growth continued, with a slight pickup seen in the energy sector. There were, however, scattered reports of a slowdown in hiring amid weaker demand and recession fears. Labor markets nevertheless remained quite tight. Commercial truck and bus drivers were in very short supply, as were healthcare workers. Several contacts noted an inability to find skilled tradespeople. Industries that require onsite work were having difficulty competing for workers with industries that can offer remote work and flexible hours. Some employers have rebranded undesirable positions to attract workers. A few contacts noted a higher degree of apathy among workers towards attendance and work quality. Some contacts said their growth plans were being constrained by an inability to bring on and retain sufficient staff. Among 384 Texas business executives responding to a Dallas Fed September survey, nearly half cited labor shortages as a primary concern around their firm's outlook.

Wage growth eased slightly but remained high. Employees continued to demand higher pay, and companies responded in an effort to recruit and retain employees. Some contacts noted losing employees to competitors or other industries offering higher pay. A staffing firm said they were seeing a lot of workers switching jobs to attain higher wages.


Input costs continued to climb at about the same elevated pace as during the prior period, while growth in selling prices continued to ease. Manufacturers reported higher raw materials prices driven by supply-chain constraints, particularly from overseas suppliers. Services firms commented that the ripple effect of inflation was a challenge, and numerous contacts noted greater difficulty passing on cost increases to customers. A restaurant said their biggest concern was customer pushback on menu price increases. Retailers also said customers were starting to push back on pricing. Fuel prices moved lower over the past six weeks, but airlines noted increases in ticket prices amid solid demand and higher labor and non-fuel costs.


Texas manufacturing output increased moderately during the reporting period, picking up pace from the more modest expansion seen over the summer. Growth was led by durable goods manufacturing such as machinery and high tech. New orders for manufactured goods continued to weaken, however, with contacts citing customer concerns surrounding inflation and potential recession. A luxury product manufacturer said they expect sales to fall as customers cut discretionary spending, and a personal electronics manufacturer said they also expect weakness going forward. Manufacturing tied to the upstream energy sector continued to experience rising demand over the past six weeks, while petrochemical companies and refineries reported slowing demand. The energy crisis in Europe is expected to boost demand for Texas petrochemical producers and refineries, though it has prompted some new supply-chain shortages of components produced there. Overall manufacturing outlooks were more pessimistic than optimistic, with contacts pointing to rising interest rates and a weaker business climate as headwinds.

Retail sales

Retail sales declined over the past six weeks, as inventories continued to build. Auto sales weakened, hampered in part by vehicle production delays, labor shortages, and high prices. One contact said new vehicle inventory bottomed out in August and has begun to rise, and continuous improvement is expected in the fourth quarter. Overall outlooks worsened, with some concern about rising interest rates and compressed profit margins.

Nonfinancial services

Service sector activity expanded at a more modest pace during the reporting period. Revenue growth was broad based, though some contacts noted weaker demand. Transportation services firms reported higher cargo volumes and ridership. Airlines noted unseasonably strong leisure travel in the third quarter. Staffing services firms reported strong demand, with increases in requests for both low and high-skill workers. However, several contacts noted a pullback in customer activity amid recession worries. Service sector outlooks were largely unchanged overall.

Construction and real estate

Activity in the housing market remained weak. Sales slipped further and contract cancellations were highly elevated in part due to rising mortgage rates pricing more buyers out of the market. Buyer incentives increased, putting downward pressure on home prices and builders' margins. Outlooks worsened, with contacts expecting further deterioration in sales and starts. Apartment leasing moderated, though year-over-year rent growth remained solid. Office leasing ticked up, but uncertainty was elevated. Fundamentals in the industrial market stayed solid. Contacts noted that the higher cost of capital was pushing investors to the sidelines.

Financial services

Loan demand declined for the first time in nearly two years, and overall loan volume decreased over the past six weeks. Volume declines were seen in all loan categories, but the steepest came in residential real estate lending. Loan nonperformance varied by category but was largely unchanged overall. Loan pricing continued to rise notably, with 85 percent of contacts reporting an increase—the largest share since the survey began in 2017. Credit standards and terms tightened further. Looking six months ahead, contacts expressed greater pessimism than in the prior period and expect loan demand and general business activity to decrease and loan delinquency to increase.


Energy activity continued to expand. The Eleventh District rig count was mostly flat over the past six weeks while well completions ticked up. Demand for oilfield services was high, but the industry was constrained by equipment and labor shortages. Outlooks were strong, with contacts expecting oil and natural gas prices to remain high enough to prompt an upward trend in energy activity for the foreseeable future.


Significant rainfall early in the reporting period greatly improved drought conditions across much of the district, though soil moisture has begun worsening again in recent weeks. Many areas experienced little-to-no row crop production as a result of the drought, causing fields to be plowed under. Significant culling of cattle herds continued, though the pace slowed slightly as much-needed rainfall greened up pastures.

Community perspectives

Nonprofits reported increased demand for services among the communities they serve over the past six weeks. Utilization of food assistance rose, and multiple contacts noted seeing increased use by middle-income individuals seeking to subsidize their household budgets amid rising inflation and rent. Demand for utility assistance spiked. Contacts were mixed on childcare assistance—some noted a lack of demand while others noted a lack of affordable childcare options, as many daycare centers closed down during the pandemic or cannot operate at full capacity because of labor shortages. Contacts reported an uptick in demand for English language classes and workforce training to help workers obtain higher-paying jobs.

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