Texas Manufacturing Outlook Survey

Texas Manufacturing Outlook Survey

Data were collected May 15–23, and 95 Texas manufacturers responded to the survey.

1. What, if anything, are you doing to recruit and retain employees? Please check all that apply.

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Increase wages and/or benefits	55.8	53.5	51.7
   Intensify recruiting, including advertising, paying recruiting bonuses, utilizing employment agencies, etc.	53.5	65.1	67.4
   Offer additional training	30.2	43.0	40.4
   Increase variable pay, including bonuses	26.7	31.4	28.1
   Improve working conditions	24.4	18.6	24.7
   Reduce education and other requirements for new hires	14.0	4.7	11.2
   Other	7.0	7.0	5.6

2. Are you having problems finding qualified workers when hiring?

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Yes	77.9	69.7	72.7
   No	22.1	30.3	27.3

3. If you are having problems finding qualified workers, in which categories are you experiencing difficulty? Please check all that apply.*
   

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Low-skill positions (typically require high school diploma or less and minimal work experience)	62.9	64.7	61.1
   Mid-skill positions (typically require some college or technical schooling)	70.0	70.6	66.7
   High-skill positions (typically require college degree or higher)	28.6	32.4	30.6

4. If your firm has experienced upward wage pressure over the past 12 months, for each category below please select the extent to which your firm raised wages (excluding benefits) in response:
   

   	None	Less than 4 percent	4 percent or more
   Low-skill positions	13.8	47.7	38.5
   Mid-skill positions	9.1	45.5	45.5
   High-skill positions	15.8	38.6	45.6

5. What annual percent change in wages and input prices did your firm experience in 2017 and what do you expect for 2018? Also, by how much did your firm change selling prices in 2017, and by how much do you expect to change selling prices in 2018?

   	2017 actual (percent)**	2018 expected (percent)**
   Wages	3.4	4.2
   Input prices (excluding wages)	3.1	6.2
   Selling prices	2.3	4.0

6. If your firm has experienced an increase in costs (including wages, benefits, other inputs, etc.), how has your firm’s ability to pass those increases on to customers changed over the past year?

   	May ’18 (percent)
   Much easier now	1.2
   Somewhat easier now	30.2
   Similar to a year ago	31.4
   Somewhat harder now	24.4
   Significantly harder now	12.8

*This question only posed to firms that noted they are having problems finding qualified workers when hiring.
**Shown are trimmed means with the lowest and highest five percent of responses omitted.

Special Questions Comments

These comments have been edited for publication.

Chemical Manufacturing

• Sign-on bonuses are sometimes necessary for some highly skilled or postgraduate positions.

Primary Metal Manufacturing

• Our selling price is up, but we have no idea what we will be paying in the coming months. This new selling price is to protect us, we hope.

Machinery Manufacturing

• As a domestic manufacturer, it is virtually impossible for us to raise pricing when the customer can buy the finished product directly from China for less than the cost of American raw material.
• Everyone is experiencing the same increases in steel prices.
• We are investing in capital equipment to help lower our reliance on third-party manufacturers and cost of goods sold. Our customers are demanding significant discounts on goods, while our employees are expecting raises after two years of flat wage growth. We anticipate significant borrowing in the future to help cover these investments.
• We’ve begun manufacturing our own products. We opened a machine shop at a cost of $1.5 million, but our long-term savings and control of our business will be much greater with tight quality control.

Printing and Related Support Activities

• We are just starting to feel wage pressure.
• Over the past six or seven years, the printing industry as a whole has experienced many difficulties due to the economy. Even though the economy is improving, we have not seen an increase in sales. Over the past 18 months, printing has been a declining market. Digital sales have increased over the past few months due to the need for shorter runs for less money. As new business growth comes into the Dallas–Fort Worth area, we hope this will also bring a need for increased printing, improving our offset runs. As far as recruiting, we have very little turnover, and workers for mid-skilled positions are harder to find. Finding low-skilled workers is much easier, but we have the expense of training them. When material costs increase, which they have over the past six months, the increase is passed on to our customers through our quotes. The increases in materials have been around 1.5 percent.

Transportation Equipment Manufacturing

• Steel price increases that are unjustified is our biggest cost increase.

Paper Manufacturing

• We have not needed to expand our high-skilled staff. The factory staff is where we have needed expansion, and the market just doesn't have factory-experienced workers available. When we look for candidates for our training program, there is just not the trainable pool available.
• We are experiencing very tough employment conditions right now. There are not enough workers. We have to overpay to retain what we have. What has happened to the work ethic?
• Business volume is outstanding. Margins are terrible.

Food Manufacturing

• We have to pay more to incentivize workers to leave their jobs and come to work for us.

Texas Service Sector Outlook Survey

Data were collected May 15–23, and 233 Texas business executives responded to the survey.

1. What, if anything, are you doing to recruit and retain employees? Please check all that apply.

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Increase wages and/or benefits	63.9	53.2	48.6
   Intensify recruiting, including advertising, paying recruiting bonuses, utilizing employment agencies, etc.	52.3	60.9	62.1
   Increase variable pay, including bonuses	33.3	34.1	29.6
   Improve working conditions	28.2	23.6	22.9
   Offer additional training	26.9	36.4	34.0
   Reduce education and other requirements for new hires	6.0	7.3	7.9
   Other	7.4	8.2	7.1

2. Are you having problems finding qualified workers when hiring?

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Yes	66.1	62.9	65.3
   No	33.9	37.1	34.7

3. If you are having problems finding qualified workers, in which categories are you experiencing difficulty? Please check all that apply.*
   

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Low-skill positions (typically require high school diploma or less and minimal work experience)	49.0	45.3	41.6
   Mid-skill positions (typically require some college or technical schooling)	65.1	57.2	57.9
   High-skill positions (typically require college degree or higher)	41.6	42.8	40.4

4. If your firm has experienced upward wage pressure over the past 12 months, for each category below please select the extent to which your firm raised wages (excluding benefits) in response:
   

   	None	Less than 4 percent	4 percent or more
   Low-skill positions	27.6	40.4	32.1
   Mid-skill positions	21.7	42.2	36.0
   High-skill positions	29.8	29.8	40.4

5. What annual percent change in wages and input prices did your firm experience in 2017 and what do you expect for 2018? Also, by how much did your firm change selling prices in 2017, and by how much do you expect to change selling prices in 2018?

   	2017 actual (percent)**	2018 expected (percent)**
   Wages	4.0	4.7
   Input prices (excluding wages)	3.1	4.4
   Selling prices	2.2	3.3

6. If your firm has experienced an increase in costs (including wages, benefits, other inputs, etc.), how has your firm’s ability to pass those increases on to customers changed over the past year?

   	May ’18 (percent)
   Much easier now	3.1
   Somewhat easier now	21.0
   Similar to a year ago	42.1
   Somewhat harder now	19.5
   Significantly harder now	14.4

*This question only posed to firms that noted they are having problems finding qualified workers when hiring.
**Shown are trimmed means with the lowest and highest five percent of responses omitted.

Special Questions Comments

These comments have been edited for publication.

Broadcasting (Except Internet)

• We have probably not experienced upward wage pressure because our internal "minimum wage" is $10 an hour.

Telecommunications

• We can’t raise our rates or our customers will move their business offshore.

Credit Intermediation and Related Activities

• Wages for processors have increased because there are not enough qualified candidates. We are having to hire right out of college and having to train, which takes time.

Securities, Commodity Contracts, and Other Financial Investments and Related Activities

• We are scared about the increasing deficit and continued growth of entitlement programs.

Insurance Carriers and Related Activities

• Our premium rates are fixed and set by the state of Texas.

Rental and Leasing Services

• From mechanics to sales representatives, people are impossible to find. The oilfield is heating up and providing crazy high wages.
• Competition is too heavy in the heavy construction equipment sales industry to raise sales prices much, if at all.

Professional, Scientific and Technical Services

• We increased salaries in January an average of 4 percent across our staff.
• We are a services company, so our primary input price is wages.
• Longer-term (more than one year) contracts are restricting our pricing flexibility.

Administrative and Support Services

• We have had to offer wage increases to keep qualified workers.
• Clients are turning away business and working overtime because they cannot find workers even with pay increases of 10 percent or more.
• We now offer convention, conference, trade mission and translation services.
• We are not funded by the customer; our funding is based on hotel lodging revenues and a percentage of certain tax collections.
• Competition dictates the potential for price increases. Texas has very competitive markets.

Educational Services

• We are working hard with our local high schools to build programs for craft labor in vocational agriculture programs because we fear a lack of craftsmen to build, repair and maintain our projects.

Ambulatory Health Care Services

• We've had to raise wages to match what we are having to pay new hires.
• We cannot pass along cost increases; we are restricted by contracts and government regulation.
• As an imaging center, prices are established by CMS (Centers for Medicare & Medicaid Services) and payers. Price adjustments are always down—a deflationary business environment. We are extremely efficient.
• As a medical provider, we often do not have control regarding payer reimbursement levels with the exception of a few procedures.

Social Assistance

• We are a nonprofit and don't charge for our services.

Amusement, Gambling and Recreation Industries

• Austin is growing very fast, and there are about the same number of people available to work in the lower-skilled jobs.

Accommodation

• Improved flow is more achievable based on the increase in revenue, driven by both price increases and volume growth.

Food Services and Drinking Places

• Some areas in San Antonio and Dallas have become more competitive.

Personal and Laundry Services

• Wage pressure has increased by almost 20 percent.

Religious, Grantmaking, Civic, Professional and Similar Organizations

• We are not currently hiring.

Texas Retail Outlook Survey

Data were collected May 15–23, and 45 Texas retailers responded to the survey.

1. What, if anything, are you doing to recruit and retain employees? Please check all that apply.

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Intensify recruiting, including advertising, paying recruiting bonuses, utilizing employment agencies, etc.	65.9	60.9	66.0
   Increase wages and/or benefits	56.8	41.3	56.6
   Increase variable pay, including bonuses	36.4	43.5	39.6
   Improve working conditions	27.3	26.1	24.5
   Offer additional training	18.2	32.6	34.0
   Reduce education and other requirements for new hires	6.8	10.9	13.2
   Other	4.5	4.3	5.7

2. Are you having problems finding qualified workers when hiring?

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Yes	82.2	75.5	76.4
   No	17.8	24.5	23.6

3. If you are having problems finding qualified workers, in which categories are you experiencing difficulty? Please check all that apply.*
   

   	May ’18 (percent)	Feb. ’18 (percent)	Nov. ’17 (percent)
   Low-skill positions (typically require high school diploma or less and minimal work experience)	69.4	55.6	54.8
   Mid-skill positions (typically require some college or technical schooling)	75.0	69.4	66.7
   High-skill positions (typically require college degree or higher)	30.6	13.9	21.4

4. If your firm has experienced upward wage pressure over the past 12 months, for each category below please select the extent to which your firm raised wages (excluding benefits) in response:
   

   	None	Less than 4 percent	4 percent or more
   Low-skill positions	2.9	52.9	44.1
   Mid-skill positions	9.1	45.5	45.5
   High-skill positions	37.0	29.6	33.3

5. What annual percent change in wages and input prices did your firm experience in 2017 and what do you expect for 2018? Also, by how much did your firm change selling prices in 2017, and by how much do you expect to change selling prices in 2018?

   	2017 actual (percent)**	2018 expected (percent)**
   Wages	3.8	4.5
   Input prices (excluding wages)	3.5	5.3
   Selling prices	3.5	5.3

6. If your firm has experienced an increase in costs (including wages, benefits, other inputs, etc.), how has your firm’s ability to pass those increases on to customers changed over the past year?

   	May ’18 (percent)
   Much easier now	2.4
   Somewhat easier now	24.4
   Similar to a year ago	31.7
   Somewhat harder now	24.4
   Significantly harder now	17.1

*This question only posed to firms that noted they are having problems finding qualified workers when hiring.
**Shown are trimmed means with the lowest and highest five percent of responses omitted.

Special Questions Comments

These comments have been edited for publication.

Merchant Wholesalers, Nondurable Goods

• Our entire industry is facing upward pricing pressure. This is making it easier for us to pass along the industry increases.

Motor Vehicle and Parts Dealers

• It is difficult to find commissioned salespeople and high-skilled auto technicians.
• The cost of health care and property and casualty insurance has increased significantly. We also have concerns on the increase in interest rates.
• We do not measure specific wage growth in our workforce. We are having to increase our pay scale for new hires. We are seeing difficulty passing increased costs on to the consumer due to margin compression from internet sales activity.

Building Material and Garden Equipment and Supplies Dealers

• We get a lot of applicants who think they have skills but really do not. This always happens when the economy picks up.
• Recent federal tax legislation has increased the after-tax cost of labor by over 20 percent. Legislative pushback on the Affordable Care Act and Medicaid cuts are expected to result in cost increases for both employers and employees.
• Things we used to not charge for we are using as upgrades and charging to make up for input prices rising.

Truck Transportation

• Trucking is seeing an acute shortage of truck drivers.

Clothing and Clothing Accessories Stores

• As a retailer, input prices do not really apply.