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Reports on Regional Economic Activity

Eleventh District Beige Book

November 30, 2022

Summary of economic activity

Modest growth continued in the Eleventh District economy. Expansion in manufacturing eased slightly while service sector growth ticked up. Retail sales and home sales fell further. Rising interest rates dampened loan demand, with loan volumes declining for the second consecutive reporting period. Activity in the energy sector continued to expand, though growth remained constrained by equipment and labor shortages. Local nonprofits cited higher demand for assistance amid rising household costs. Widespread rains improved drought conditions. While employment expanded at a solid rate and wage growth was generally high, there were reports of a slowdown in hiring and layoffs. Price pressures remained elevated but eased notably in retail. Outlooks were mostly pessimistic except for the energy sector, and uncertainty increased, with contacts voicing concern about inflationary pressures, weakening demand, and labor challenges.

Labor markets

While employment growth stayed solid, it eased from the more robust pace seen in the summer. Among business executives responding to a Dallas Fed survey, 56 percent cited hiring or recalling workers in October, down from 62 percent in July. In the same October survey, 31 percent of firms said they were understaffed and looking to hire for new positions and another 20 percent noted being understaffed and looking to hire for replacement only. Labor markets remained tight, with numerous reports of hiring difficulties. A fabricated metal manufacturer noted that the firm was operating by prayer these days. Healthcare workers were in short supply, as were commercial truck drivers, auto technicians, restaurant, and oil field workers. In contrast, some contacts said that weakening demand, economic uncertainty, and rising costs were restraining hiring activity. Mortgage banking firms were under a hiring freeze, builders noted improvement in the availability of labor in certain trades, and there were reports of layoffs in the tech industry.

Wage growth remained high. A few service firms cited downsizing to reduce costs, but many contacts noted struggling to find qualified workers and offering higher pay to attract them. A staffing firm said that candidates were using job offers to negotiate pay increases with their current employers.


While input costs continued to climb, the pace of increases eased in the construction, manufacturing, and retail sectors. Growth in selling prices generally remained high, although some firms still commented that inflation was affecting their bottom line, prompting cost cutting. Manufacturers reported higher raw materials prices, and services firms said inflation and higher operating costs were a challenge. A restaurant commented changing their menu offerings due to higher costs and limited passthrough. Home prices fell, while airlines noted elevated ticket prices due to solid demand.


Texas factory output increased modestly in October. Growth was led by durable goods manufacturing. However, new orders for manufactured goods continued to weaken due to higher inventories and concerns surrounding a potential recession. A machinery manufacturer said that companies were being more careful about their spending, and a computer electronics manufacturer commented that demand for personal electronics had deteriorated, with weakness spilling over into other markets. Manufacturing tied to the upstream energy sector continued to experience rising demand and extended lead times for components and machinery over the past six weeks. Refineries and petrochemical manufacturers meanwhile reported softening demand, although the European energy crisis is expected to continue to boost Texas' refined and petrochemical product exports. Chemical manufacturers noted that increased production capacity and slowing demand for construction-related materials have squeezed polymer margins. Overall manufacturing outlooks were generally weak.

Retail sales

Retail sales declined over the past six weeks. Auto sales weakened, hampered in part by high interest rates. A few building materials suppliers commented that they were surprised by the rapid slowdown in demand. Inventories continued to build, and outlooks worsened, with some concern about inflation, rising interest rates, compressed profit margins, and a weaker business climate.

Nonfinancial services

Service sector activity expanded modestly during the reporting period, but outlooks were pessimistic. Revenue growth was mostly broad based, though some contacts noted slowing demand due to higher interest rates and inflation, among other factors. Transportation services firms reported mixed activity in sea and air cargo shipments and ridership. Airlines noted unseasonably strong demand for leisure travel and an uptick in business travel. Staffing services firms saw continued strong demand for their services.

Construction and real estate

Activity in the housing market weakened further. Sales slipped again and contract cancellations stayed elevated as high mortgage rates priced buyers out of the market. Among the major Texas metros, Austin appeared to be the roughest market and was experiencing larger price declines to generate sales. Buyer incentives increased notably, putting downward pressure on home prices and builders' margins. Outlooks worsened, with contacts expecting further erosion in sales and home starts in the near term. Apartment leasing slowed and rents were flat to down during the reporting period. Office leasing remained soft and ample sublease space a concern, while fundamentals in the industrial market stayed solid. Contacts said that the higher cost of capital was pushing up cap rates and slowing investment sales activity.

Financial services

Loan volumes declined broadly for a second period in a row due to a steep decline in loan demand. Commercial real estate and commercial and industrial loan volume continued to contract, though at slower rates than over the prior six weeks, while residential real estate and consumer loan volumes declined notably faster. Loan nonperformance rose slightly. Contacts still overwhelmingly reported loan price increases, and credit standards and terms continued to tighten. Business activity experienced a greater decline over the past six weeks, and expectations for the next six months are for loan demand and business activity to decline further and loan performance to worsen.


Energy activity expanded slightly during the reporting period. The Eleventh District rig count was fairly flat, while well completions ticked up. Demand for oilfield services was high and the industry remained constrained by equipment and labor shortages. Outlooks were positive, with contacts expecting oil and natural gas prices to remain elevated enough to drive steady increases in energy activity for the foreseeable future, though concern about a slowdown in future economic growth increased.


Widespread rainfall somewhat improved pasture and soil moisture conditions, though a majority of the district remains in drought. Agricultural commodity prices remained strong, though contacts said unprecedented volatility in cotton markets as well as a relatively low cotton price compared with grain prices may prompt a significant drop in cotton acreage next year. Beef demand remained strong, and prices were up from six weeks ago but down from a year ago because of increased beef supply due to more animals moving to slaughter amid the drought this year.

Community perspectives

Nonprofits reported higher demand for their services during the reporting period. Contacts said that low- and moderate-income individuals were struggling to afford basic needs, such as rent and food, and that these struggles have recently worsened. Utilization of housing assistance has increased notably, and a school district executive mentioned that high home prices were a barrier to recruitment and retention of kitchen and custodial staff. Demand for food assistance rose, particularly among students, and food banks in some areas were unable to keep pace with the increased need. Childcare assistance needs rose as more families returned to the workforce due to depleted savings or decreased concerns surrounding COVID-19. Amid high demand for services, some nonprofit leaders noted challenges with soliciting donations and retaining talent.

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