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Reports on Regional Economic Activity

Eleventh District Beige Book

May 31, 2023

Summary of Economic Activity

The Eleventh District economy continued to expand modestly. Manufacturing output was flat while revenue in the service and retail sectors grew. Energy reports were mixed with oilfield activity steady, but declines seen on the natural gas side. Housing contacts noted a decent spring selling season and stable prices. Credit conditions tightened further, and loan demand continued to decline. Agricultural conditions improved in some areas but remained strained by drought in others. Local nonprofits cited higher demand for assistance. Overall payrolls rose moderately, and wage growth remained elevated. Outlooks continued to worsen as uncertainty remains on the rise, and contacts voiced concern over waning demand, rising interest rates, and the overall health of the economy.

Labor Markets

Employment growth rebounded slightly to a more moderate pace over the reporting period. Hiring resumed in the service sector in April after stalling in March, and manufactures continued to add to payrolls at an average pace. Oilfield services firms were still hiring, though some layoffs were seen in natural gas regions. Scattered reports of layoffs also came from transportation services and manufacturing. In an April Dallas Fed survey of 370 Texas business executives, more than half were currently trying to hire. Forty percent said the availability of applicants improved over the past month, significantly higher than the 14 percent share reporting a worsening. Reports of binding labor constraints continued in the energy sector, and mentions of worker shortages came from a few other sectors as well, including healthcare and retail.

Wage pressures remained elevated. The notable wage deceleration seen last year seems to have largely flattened out this year. A few contacts said they were unable to pay the required wage rate to attract workers.


Input cost inflation remained below average for manufacturers but was still elevated in the service sector. Fuel costs declined over the reporting period, though a few contacts noted that continued increases in labor costs offset any relief in input costs (fuel or otherwise). Several contacts noted an increase in borrowing costs, in some cases significant. Selling prices remained elevated in the service sector. Airlines reported high ticket prices amid strong demand and constrained supply (pilots and aircrafts).


Texas manufacturing experienced lull in output growth in April, continuing the pattern seen so far this year of bouncing between little to no expansion. New orders continued to fall, though not as fast as the prior couple of months. One contact said customer inventories were high from overstocking last year. Durable goods demand is holding up better than nondurable, led by fabricated metals and transportation equipment. Reports from refineries and chemical producers were mixed. Overall, manufacturing outlooks worsened further, and uncertainty continues to climb.

Retail Sales

Retail sales increased modestly in April after holding steady in March. Auto dealers reported a decline in sales. They cited low consumer confidence and noted that higher interest rates were starting to affect profitability due to increased costs to finance new-vehicle inventories. Wholesalers and pharmacies noted particular strength over the past six weeks. Overall outlooks were more pessimistic than other sectors.

Nonfinancial Services

Service sector activity continued to grow at a fairly modest pace in April. Revenue growth was led by health care followed by professional, scientific, and technical services. Notable revenue declines were seen in leisure and hospitality, with contacts citing a slowdown in spending by customers due to economic uncertainty. Some services firms noted a decreased availability of equity and debt capital, but the majority continued to note no difficulty obtaining financing for either short- or long-term use. Staffing firms reported stable demand, with more optimism for placements of white-collar workers than manufacturing workers. Multiple contacts said one source of strong demand is IT workers—connecting small to mid-size firms with workers laid off by large firms. Overall outlooks continued to worsen in April, though pessimism waned slightly.

Construction and Real Estate

Housing demand broadly held up during the reporting period, though sales continued to be weaker than a year ago. Contacts noted a decent spring selling season, with prices largely stable, and builders were able to raise prices slightly in selected areas. With housing starts notably below year ago levels, building cycle times and labor availability has improved. New land and lot development remained subdued. Outlooks were cautious with some voicing concern about whether demand would hold up beyond the spring selling season.

Activity in the apartment and retail market was little changed since the last report. Apartment rents were flat, and a contact noted an uptick in evictions in some areas. Office markets continued to face headwinds, with rising vacancy and subdued demand. Outlooks were mixed, with concern about the uptick in office commercial mortgage-backed securities delinquency and loans coming up for renewal this year.

Financial Services

Loan demand declined for the sixth period in a row amid further loan price increases and worsening general business activity. Overall loan volumes continued to decline as well, though at a slower pace. Residential real estate loan volumes stabilized after falling for several months, and consumer loan volume declines slowed notably. Significant volume declines continue to be seen in commercial and industrial and commercial real estate lending. Credit conditions tightened further; 48 percent of bankers in the Dallas Fed Banking Conditions Survey said they tightened credit standards and terms over the past six weeks, the highest share since the survey began in 2017. Loan nonperformance continued to increase slightly. The banking outlook continues to deteriorate, with contacts expecting a further contraction in business activity and loan demand and an increase in nonperforming loans over the next six months.


Drilling and frac activity for oil wells was essentially flat over the past six weeks, while natural gas-directed drilling declined amid low natural gas prices that have been pressured by swelling inventories and mild weather. Overall, the Eleventh District rig count fell by 14 rigs over the reporting period. Outlooks were mixed. The industry is still expected to increase oil-directed drilling and completion activities modestly through year end, while prospects on the natural gas side have worsened.


Recent rainfall improved drought conditions in the eastern part of the district while severe drought persisted in much of the western part. Grain prices generally decreased over the reporting period, amid a positive outlook for U.S. crop production this year. Drought will hamper crop production in Texas, however, and, in particular, contacts expect a below average cotton crop this year. A bright spot for agricultural producers is on the livestock side, where cattle prices rose notably over the past six weeks and are significantly above last year's prices, supported by tighter supplies and solid demand for beef.

Community Perspectives

Nonprofits continued to see increased demand for their services. Food insecurity remains a rising concern for lower-income families, and some nonprofits report record use of their food pantries. Contacts pointed to inflation and the cessation of pandemic-era expanded SNAP benefits in March. Housing affordability was also a primary concern, and one contact said low housing inventory has made their provision of housing vouchers difficult. The nonprofit has sufficient funding for the vouchers but cannot find enough landlords willing to accept them, often because they believe they can get a higher rent from other perspective tenants. Multiple contacts mentioned consequences of the digital divide—a struggle with digital literacy and access to technology is a barrier to employment for lower-income individuals, as well as a barrier to credit access given the decline in brick-and-mortar banks.

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