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Reports on Regional Economic Activity

Eleventh District Beige Book

Summary of Economic Activity

The Eleventh District economy continued to expand at a modest pace overall. Growth moderated in the service sector but rebounded in manufacturing and energy. Retail and financial services activity declined. Existing-home sales dipped while new home sales were mostly solid. High temperatures and insufficient rainfall continued to plague agricultural conditions. Nonprofits expressed concern over daycare closures in the wake of pandemic era relief funds expiring. Employment growth was modest, and wage growth continued to normalize. Input cost growth remained slightly elevated overall, while selling price growth was average or below average. Outlooks generally weakened slightly, with contacts expressing concern over worsening business conditions, high interest rates, and the political environment.

Labor Markets

Employment growth remained modest over the past six weeks. Hiring decelerated in the service sector but picked up in manufacturing. In the energy sector, job growth moderated to a more average pace after two years of elevated hiring. Layoffs were noted by some cargo carriers and high-tech companies. Most sectors reported greater ease in finding workers than in prior periods. However, oilfield contacts said shortages of high-skill blue collar workers persist, and hospitality workers were also in short supply. There were scattered reports of labor hoarding—businesses saying they ordinarily would release some workers because of weak sales but were holding off "just in case." A staffing firm noted the labor market is looser than it has been, saying "it's not a pool, but at least we've got some drops on the ground." Another said baby boomers were staying longer in the workforce because increases in cost of living have left them without much of a choice but to work.

Wage growth continued to normalize, though it was still somewhat elevated. Homebuilders noted some reprieve in labor costs, and energy companies said wage pressure lessened from last quarter. Staffing firms said wage pressure eased over the past six weeks, in part because firms were pushing back more on hybrid and remote arrangements, and candidates were willing to ease up on wage demands to gain that flexibility.


Input cost growth showed no signs of easing over the past six weeks outside of the energy and construction sectors. Oilfield cost increases moderated, and contacts reported cost declines in some inputs like sand and steel. Also, builders said the cost of most construction materials have stabilized. Meanwhile, airlines and cargo carriers noted an increase in fuel costs. Selling price growth remained subdued in manufacturing and energy but was more moderate in services. A staffing firm reported an increase in payment delinquency due to cash flow issues among clients.


Texas manufacturing activity rebounded in September. Production increases spanned durables and nondurables and were led by machinery and high-tech manufacturing. Chemical production improved amid stabilizing demand. However, much uncertainty persists, and manufacturers' perceptions of broader business conditions worsened overall. Outlooks continued to deteriorate, with several contacts citing high interest rates as a headwind, particularly auto manufacturers.

Retail Sales

Retail sales declined slightly over the past six weeks, with notable weakness in auto sales. Some retailers said the continuation of unseasonably hot weather was a factor behind the slump. Auto dealers pointed to reduced affordability spurred by higher interest rates as a major factor. Meanwhile, contacts along the border noted that the strong peso was drawing Mexican shoppers to U.S. stores. Retail outlooks improved slightly, though auto dealers expressed concern over the impact of the strike.

Nonfinancial Services

Growth in service sector activity decelerated to a more typical pace in September. Professional and business services remained the top performing industry, and a pickup was seen in health care. Airlines continued to report robust demand, particularly for leisure and international travel. A transportation contact noted that the drought impact on the Panama Canal may increase air cargo demand as an alternative for moving goods internationally. Reports from staffing services firms were mixed. One contact said contract business is way down across the board, as more customers are looking for permanent hires. Service sector outlooks worsened slightly overall, with contacts citing inflation and softness in the real estate market as headwinds. One business executive said he expects the next twelve months to be "chaotic," with uncertainty driven by high interest rates and the national political landscape.

Construction and Real Estate

Housing demand generally held up during the reporting period despite higher mortgage rates, though contacts noted some seasonal softening. Existing-home sales dipped in part due to lack of inventory, while builders said new home sales and buyer traffic were mostly solid for this time of the year. Incentives such as rate buydowns remained in place and were buoying sales of new homes. A shortage of transformers continued to dampen single-family home completions. Outlooks remained cautious.

Activity in commercial real estate was little changed since the last report. Apartment leasing was solid, though rents and occupancy were largely flat as supply continued to outpace demand. Office markets continued to face headwinds. Industrial demand softened, though the overall level of activity remained robust. Investment sales activity was subdued, and outlooks were mixed.

Financial Services

Loan demand has been declining for a year, and the pace accelerated this period. Overall loan volumes declined at a quicker pace this period as well. Loan nonperformance rose, particularly for consumer loans, but increased delinquency was seen across the board. Credit standards continued to tighten, most notably on the commercial side. Loan pricing pushed up further, though at the slowest rate so far this year. Bankers remain pessimistic, with expectations for increasing loan nonperformance, decreasing loan demand, and worsening business activity over the next six months.


Energy activity picked up modestly over the reporting period. Respondents to the Dallas Fed Energy Survey indicated a rise in business activity and a sharp increase in oil and natural gas production in the third quarter. Drilling and completion activity for oil and gas wells declined over the past six weeks, though most contacts expect the rig count to stabilize soon. Outlooks improved notably, particularly among exploration and production firms. Contacts expressed confidence that oil prices will remain conducive for profitability over the next year but said their natural gas drilling outlook had worsened.


Drought intensified across much of the District over the past six weeks and crops continued to suffer from excessive heat. Grain prices fell notably, with wheat hitting its lowest price in two years. Pasture forage conditions were poor to very poor, and ranchers were still supplemental feeding, which is unusual for this time of year. Cattle prices remained high amid tighter supply, cheaper production costs in feed lots, and strong demand for beef.

Community Perspectives

Demand for nonprofit services remained elevated. Affordable housing was a pressing concern, and one nonprofit said they received additional housing assistance funding but were constrained by the limited number of landlords willing to accept housing vouchers. Another contact noted that inflation continued to squeeze households' food budgets, putting healthier food options out of reach. One nonprofit reported they often had a two-to-four-hour line at their food pantry.

Several contacts expressed concern over the ending of pandemic era relief funds, particularly for childcare centers. Multiple daycare centers have already announced closures, with one nonprofit leader noting that the impact to affected families is "catastrophic," as there aren't other options in the area. Some local workforce boards were proactively enrolling childcare centers into the state childcare subsidy program and mentoring them, with the hope of providing more options for low-income families.

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