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Reports on Regional Economic Activity

Eleventh District Beige Book

Summary of Economic Activity

The Eleventh District economy expanded at a modest pace over the reporting period, with most sectors holding steady or experiencing slight growth. Job growth picked up in the service sector. Wage growth moderated but high labor costs remained a key concern for many businesses. Overall input cost and selling price growth held slightly above average. Demand for nonprofit services remained elevated, and housing affordability and daycare access continued as key issues. Business outlooks were neutral to pessimistic, with contacts citing weakening demand as the primary concern going forward. Heading into an election year, U.S. political uncertainty was also noted by many firms.

Labor Markets

Employment expanded modestly over the past six weeks, with services job growth picking up while manufacturing job growth abated. In a Dallas Fed survey of 365 business executives, around half reported still being understaffed. While labor availability has improved, many firms noted a mismatch between the skills and experience they desire and those of the job candidates. Some firms noted they were overstaffed, particularly in financial services and manufacturing, though very few were laying off workers. One contact said he considered layoffs but held off because he expects a rebound in business, and rehiring is difficult.

Wage growth was moderate across most sectors but remained slightly elevated in energy. Higher labor costs remained a top outlook concern for many businesses, particularly in education and health services and the leisure and hospitality industry. An urgent care center said wages and salaries were at a dangerously elevated level that is not sustainable in the long term. A December Dallas Fed survey showed that Texas businesses expect wage growth in 2024 to be 4.3 percent, on average, down from 5.6 percent in 2023.


Input cost growth remained slightly elevated overall, though energy firms continued to note strong rises in exploration and production costs while manufacturing raw materials price growth remained subdued. Selling price growth picked up a bit in the service sector but prices remained fairly flat for manufactured goods. District firms reported declining margins on net, with a manufacturer noting that maintaining a reasonable profit margin was elusive in 2023, with costs rising faster than they were able to raise prices. This sentiment was echoed by retail and services firms as well. Overall, contacts said they raised prices by 3.9 percent last year, on average, and expect to push through price increases this year on the order of 3.5 percent amid increased consumer price sensitivity.


Texas manufacturing activity was flat in December after contracting in November. Year-end weakness came largely from durables, particularly metals manufacturing. Manufacturers generally reported continued declines in demand, though chemical producers noted a stabilization as the unprecedented year-long global destocking cycle may have finally run its course. New orders for oil and gas machinery and equipment continued at a modest pace. Overall, manufacturing outlooks worsened slightly. More than a third of contacts cited uncertainty heading into an election year as a primary outlook concern, second only to weakening demand.

Retail Sales

Retail sales largely stabilized in December after a few months of declines. Auto dealers noted stronger sales and increased inventories, though they expressed concern over high interest rates. High interest rates also remained a top concern for wholesalers and construction-related retailers. Retail outlooks worsened overall, and uncertainty increased notably.

Nonfinancial Services

Service sector activity increased modestly in December after contracting slightly in November. Year-end strength was led by revenue growth in health care and leisure and hospitality. Professional and business services exhibited weakness, with some contacts saying new business is down and backlogs have shrunk. Revenue declines continued in transportation services, and contacts said air cargo volumes over the reporting period fell short of expectations. Passenger air travel was a bright spot, however, with record traffic and revenues over the Thanksgiving holiday and expectations for a strong finish to the fourth quarter. Overall, outlooks in the service sector were stable heading into 2024. Weakening demand remained the top concern, followed by higher labor costs and elevated inflation. Numerous contacts also cited U.S. political uncertainty, with one saying it "weighs heavily on business leaders' minds right now."

Construction and Real Estate

Housing demand improved slightly, as the recent decline in mortgage rates buoyed home sales. Buyer incentives remained prevalent, however, and outlooks stayed cautious with contacts citing economic uncertainty, diminished affordability, and tighter credit standards for construction and development loans as headwinds.

Activity in commercial real estate was little changed. Apartment leasing picked up slightly though rents remained flat. Office leasing remained weak; vacancy rates were elevated, and concessions remained widespread. Industrial vacancy rates rose as new supply continued to outpace demand. Macroeconomic uncertainty, high capital costs, and reduced appetite to lend continued to deter investment sales and construction starts across property types.

Financial Services

Loan volumes stabilized over the past six weeks after declines, and the pace of credit tightening decelerated. Loan demand continued to decline, though at the slowest pace since the end of 2022. Loan nonperformance rose again, still largely driven by consumer loans. Loan pricing continued to increase but at a slower rate. Bankers reported that core deposit volumes increased over the reporting period, following several months of decreases. Although bankers remain pessimistic and expect future business activity and loan demand to decline, the slowdown is anticipated to be milder than prior expectations.


Oil and gas activity was essentially flat over the past six weeks. Exploration and production firms continued to report increases in oil and natural gas production, while support services firms continued to report declines in business activity and equipment utilization. The increase in mergers and acquisitions seen in 2023 continued put a lid on growth in oilfield activity and is expected to extend into 2024. Production growth this year is expected to be driven by higher productivity more so than from drilling more wells. Several firms noted elevated uncertainty, citing mounting downside risks to the global demand outlook.


Drought conditions continued to recede, and contacts noted generally good soil moisture and an expectation for better crop production prospects this year with El Niño conditions forecasted through the spring. Agricultural prices were down across the board over the past six weeks. While cattle prices remained higher than a year ago, some grain prices have pulled back to two or three-year lows. Contacts noted that farmers will need strong crop yields this year to make the budget work with high production costs and relatively low grain and cotton prices.

Community Perspectives

Demand for nonprofit services remained elevated. Housing affordability continued to be a top concern, with higher rent outpacing income among many renters, and higher mortgage rates making home ownership less attainable. Nonprofits noted that families are also struggling with the costs of healthcare, food, utilities, and transportation. Access to affordable childcare remained a key barrier to parents' participation in education and the workforce although some contacts noted that more work schedule flexibility has been helpful. Contacts said that childcare subsidies, while helpful, are not immediately available and come with limitations. An executive at a workforce development board said she has never seen so much interest in solving childcare issues, particularly among employers.

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