Federal Reserve Bank of Dallas

Summary of Economic Activity

Economic activity in the Eleventh District was flat to up slightly over the reporting period. Some growth was seen in the manufacturing, banking and energy sectors, while activity in nonfinancial services was flat, and declines were seen in retail sales. Home sales remained solid. Employment levels held mostly steady overall, and price and wage growth remained fairly moderate. Outlooks were generally stable to slightly more pessimistic compared with the prior reporting period. Waning consumer demand was an ongoing concern for many businesses, and the continued conflict in the Middle East and further geopolitical tensions across the world were noted as a downside risk.

Labor Markets

Employment levels were fairly flat over the past six weeks overall, according to contacts. Job gains were seen in leisure and hospitality, health care, and nondurable goods manufacturing, while headcounts were stable or down slightly in most other industries. Oil and gas companies said they were backfilling vacancies but not looking to materially expand their workforce. The uncertain economic environment has prompted some hiring reluctance. A few contacts expressed doubt whether they will be able to maintain their existing workforce, with a staffing firm noting they are "on a cliff's edge" where they may have to lay people off. There were scattered reports of labor shortages, not concentrated in particular industries other than health care, which contacts said remained significantly understaffed.

Wage growth remained moderate. A staffing services firm noted that wage pressures have eased as workers who have been unemployed longer than expected are more open to negotiation on the wage front. A technology company said wage trends have reverted to the typical average raise of about 3 percent overall.


Prices rose at a modest to moderate pace over the reporting period. A slight ebbing was seen on the manufacturing side, for both materials and finished goods price growth. Multiple manufacturing contacts noted that they were experiencing a strong resistance to price increases, with one saying that customers ask to hold prices to last year's level, which isn't possible given the increases in costs. In services, growth in input prices remained in line with a typical rate while selling price growth slowed to slightly below average. Airlines reported upward cost pressure, partly stemming from elevated maintenance to upkeep older aircraft in the face of supply issues for new aircraft.


Overall manufacturing activity grew modestly over the reporting period, with strength led by nondurable goods production. Food and chemical manufacturers noted a rise in demand, and Gulf Coast producers led year-over-year growth in U.S. industrial chemical output. Some weakness continued on the durable goods side, particularly machinery manufacturing. One contact noted that he "keep[s] thinking we'll hit bottom and either level out or turn up, but we keep pushing those hopes out a month, and another month, and another." Manufacturing outlooks worsened slightly on net, weighed down by waning consumer confidence and election uncertainty. Chemical producers also noted a weak Chinese economy as a risk.

Retail Sales

Retail sales declined moderately over the past six weeks, with contacts reporting that elevated pricing hampered consumer goods demand. Wholesale activity was a bright spot, while auto dealers noted declining sales amid continued volatility. Overall retail outlooks worsened slightly on net, with contacts citing inflation, high interest rates and instability in the Middle East.

Nonfinancial Services

Service sector activity was mostly flat over the reporting period, with contacts saying economic uncertainty curbed consumer demand. Revenue growth was seen in administrative and support services as well as information services. Health care reported a further deterioration of revenue, and reports from transportation services were mixed. Several transportation firms noted a decline in business, while small parcel carriers reported increased volumes and airlines reported strong, stable revenues. Leisure travel continues to lead airline demand, though business travel is showing signs of growth after plateauing in late 2023. Outlooks remained fairly stable, but contacts cited concern over an economic slowdown, geopolitical tensions, and Federal Reserve policy decisions, particularly a delay in cutting interest rates. High borrowing costs remained a concern for some companies.

Construction and Real Estate

Housing demand remained solid, though there were reports of rising rates impacting sales activity. Incentives such as rate buy downs remained prevalent, and some builders offered selected price discounts to move homes in inventory.

Commercial real estate market conditions were little changed from the previous reporting period. Apartment leasing growth remained moderate, but there continued to be downward pressure on occupancy and rents due to elevated supply. In the office market, leasing activity stayed subdued and was largely concentrated in class A space. Industrial demand grew moderately, and rents were stable even as vacancy rose. Outlooks were mixed, with some commercial market segments expected to remain challenging in the near to medium term.

Financial Services

Loan volumes grew for the first time in over a year despite credit standards continuing to tighten, and loan pricing continuing to rise. Credit tightening accelerated for commercial and residential mortgages while it decelerated for commercial and industrial loans and consumer loans. Loan nonperformance picked up slightly overall. Bankers' outlooks turned pessimistic: they expect a modest decrease in loan demand six months from now in addition to a deterioration in loan performance and overall business activity. Liquidity and net interest margins top the list of outlook concerns.


Oilfield activity was flat to slightly up over the reporting period. Oil prices are broadly expected to orbit $80 for the remainder of the year, a level well above what's needed to profitably drill new wells for most producers. Even still, contacts expect only modest increases in drilling and completion activity through year-end, which will limit U.S. production growth this year compared to 2023. Natural gas prices are expected to be "below cost" for many gas producers over at least the next few months.


Drought conditions remained in the western parts of the District, while other parts received ample rainfall, and some flooding was seen in scattered areas. Pastureland was in good condition, as were hay and wheat fields. Soil conditions are quite favorable for row crops this year. Better cotton production is expected this year compared with the past couple of years based on current conditions, though cotton prices have slipped. Most other crop prices rose over the reporting period while cattle prices eased off highs. The spread of avian influenza among dairy cows remains a concern for the supply of milk, though it is not a food safety issue due to the pasteurization process.

Community Perspectives

Affordability of housing and of quality childcare remained top concerns for lower-income families over the reporting period. Higher mortgage rates, property taxes, and insurance premiums are driving up costs of single-family homes, and a shortage of landlords willing to accept housing vouchers is affecting apartment availability. One contact noted that higher mortgage rates push middle-income homebuyers to the sidelines, driving up demand for rentals and pricing lower-income residents out of the buyer's market. Access to quality, affordable childcare continued to impede workforce participation among women in particular. One contact said that industries with shift work struggle to attract women since the work schedule often doesn't align with childcare hours. Several contacts expressed concern about the winding down of American Rescue Plan Act dollars and whether nonprofits and K-12 schools will be able to sustain certain programs without that funding. Contacts also noted that mental health continues to be a community concern.

For more information about District economic conditions visit: https://www.dallasfed.org/research/texas.

Back to Top
Last Update: May 29, 2024