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Reports on Regional Economic Activity

Eleventh District Beige Book

March 8, 2023

Summary of economic activity

The Eleventh District economy continued to expand modestly. Manufacturing output and demand declined, but growth picked up slightly in the service sector. Retail sales fell again, and energy activity eased slightly. Rising interest rates further weakened loan demand. Agricultural conditions and housing market activity improved. Local nonprofits cited higher demand for assistance. Overall payrolls rose moderately, though job growth stalled out in manufacturing. Wage and cost pressures were little changed and generally remained above average. Outlooks were mostly negative, and uncertainty remained high, with contacts voicing concern about weakening demand, inflation, and high interest rates.

Labor markets

Employment increased moderately during the reporting period. The pace of hiring slowed in the service and energy sectors, and employment growth stalled out in manufacturing. While several firms continued to cite difficulty recruiting for open positions, many others reported an improvement in both the quality and quantity of applicants. Airlines cited capacity constraints due to pilot staffing issues, and one health care contact said they were lowering education and licensing requirements for several hundred job openings to expand the applicant pool. Some small or rural school districts in Texas have transitioned to a four-day school week in part due to staffing shortages and the need to attract teachers. In contrast, several firms noted hiring to cover turnover rather than to expand payrolls, and contacts in the education sector said there were less job opportunities for graduating students, particularly in high tech. There were reports of hiring freezes or layoffs in construction, manufacturing, financial services, and professional and business services.

Wage pressures remained elevated, though they have stabilized or eased recently in some industries. A staffing firm said that candidates were realizing they can't keep demanding higher wages. Downstream energy firms said wage pressures softened slightly, and construction contacts noted some easing in pricing for certain trades.


Input cost pressures generally remained elevated but there were some reports of easing in raw material pricing due to improving supply chains. Construction and land development costs were generally stable but high, and prices rose for concrete. Apartment operators noted a sizable increase in operating costs, particularly for insurance. Selling price pressures accelerated in manufacturing but were little changed in energy and services. Homebuilders continued to use incentives and discounts to close sales. Airlines expect ticket prices to stay elevated.


Texas factory output dipped slightly during the reporting period after increasing modestly in December. New orders for manufactured goods continued to decline for both durables and nondurables in part due to falling backlogs, inventory realignment, economic uncertainty, and slowing construction activity. Weakness in demand was most pronounced in construction-related manufacturing, though computer and electronic product and food manufacturers cited declines as well. Refinery utilization rates slipped, but margins remained healthy. Overall, economic uncertainty remained elevated, and outlooks weakened.

Retail sales

Retail sales declined broadly over the past six weeks. Clothing, food and beverage, furniture, and electronics store retailers cited a decrease in revenues on net. A few retailers reported less traffic, and auto dealers continued to note that higher interest rates and economic uncertainty were hampering sales. Outlooks worsened, with continued concern about affordability, high interest rates, and inflation.

Nonfinancial services

Service sector activity expanded modestly during the reporting period. Activity in business services, information, and leisure and hospitality sectors increased, and transportation services firms generally noted higher revenues and cargo volumes. Airlines saw continued strong leisure demand and said that business travel was steadily recovering. Staffing firms cited mixed demand for their services, with a few noting declines in temp hiring.

Construction and real estate

Activity in the single-family housing market improved during the reporting period following dreadfully slow activity in prior months. Buyer traffic picked up, and sales, particularly for new homes, were exceeding expectations. Contract cancellations were coming down as well, though they remained slightly elevated. Buyer incentives on new homes, including rate buydowns and discounting continued to be widespread. Prices have dipped but were holding up relatively well due to tight inventories. Outlooks improved since the last report. Apartment leasing remained sluggish, and occupancy and rents were flat.

Demand for office space remained lackluster. Activity in the industrial market continued to be solid, but contacts were concerned about the elevated construction pipeline. The higher cost of capital, tighter lending standards, and economic uncertainty has made it difficult to price deals, diminishing investment sales activity.

Financial services

Loan demand declined further, with more than half of bankers reporting a decrease over the past six weeks. Nonperformance increased notably, particularly for consumer loans, and a financial services contact said that higher interest rates had boosted inbound call volumes. Loan price growth moderated somewhat but remained highly elevated, and credit standards and terms continued to tighten. Business activity declined significantly, and expectations are for loan demand and business activity to fall further and loan performance to worsen. Contacts cited rising interest rates and inflation as headwinds and voiced concern over deposit outflows.


Oilfield activity eased slightly during the reporting period largely due to winter weather-related disruptions. Overall, energy sector activity has levelled off as labor and supply chain challenges have weighed on activity. Contacts expect spending on drilling and well completions to increase steadily this year. Outlooks remained positive, but contacts said there was still considerable uncertainty regarding the impact of sanctions on Russian refined products and of Chinese demand on energy markets.


Agricultural conditions improved slightly over the reporting period. Though much of the district remained in some level of drought, the winter wheat crop was faring better this year than last. Spring row crop planting was on the horizon, and contacts expect an increase in grain acres and a decrease in cotton acreage in 2023. Agricultural commodity prices were relatively high, and some improvement was seen in input costs, particularly fertilizer. Cattle prices rose amid solid beef demand, while egg prices have declined after surging at the beginning of the year.

Community perspectives

Nonprofits continued to report higher demand for their services. Housing affordability remained a key concern amid high rents and housing costs. Evictions ticked up, and contacts said that higher interest rates and home prices were eroding the impact of down payment assistance programs. Lack of affordable childcare was another primary issue, impeding employment for lower-income women. Nonprofits expressed concern that high operating costs together with the recent decline in public funding would limit their capacity to provide services. A contact at a public university reported that enrollment was solid but the cost of attendance and the ability to pay tuition remained a challenge for students from low to moderate income households, particularly in light of the depletion of the Higher Education Emergency Relief Funds (HEERF). Notwithstanding, a community college contact noted increased enrollment in career and technical education.

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