Federal Reserve Bank of Kansas City

Summary of Economic Activity

The Tenth District economy expanded at a moderate pace, led by rising household consumption and growth in professional business service activity. Moreover, contacts indicated their employment outlooks were less vulnerable to a deterioration in conditions compared to six months ago. Hiring activity and expected job growth were modest, with some acute indications of rising barriers to work among low-wage occupations. Several contacts noted a willingness to accept elevated wage growth over the near-term, as the alternative of lost revenue due to vacant positions would be too costly. Price dynamics were reported to be changing due to a rise in the frequency of price adjustments as well as a greater use of clauses in supplier contracts to reduce the risk of outsized input cost growth. Consumer spending rose moderately. Spending on auto services and parts showed robust growth as households maintained their vehicles that faced lower trade-in values. Commercial real estate activity stabilized across the District, but at low levels. Conditions in agriculture and energy were mixed across segments.

Labor Markets

Tenth District contacts reported hiring activity expanded slightly over the past month. Businesses indicated their priorities in hiring were generally unchanged, with ongoing focus on recruiting early-career and entry-level workers. Mismatches in between open jobs and workers' skills remained an ongoing concern, and many businesses reported they are devoting significantly more resources to training workers to close skill gaps. Wages continued to grow at a moderate pace. Several contacts noted their current willingness to accept wage growth that is higher than historical norms because the alternative of lost revenue due to vacant positions would be too costly. Looking ahead, manufacturing businesses continued to report expectations that the pace of wage growth will be slightly slower than, or similar to, last year. However, services contacts were more mixed in their expectations of wage growth, with consumer-oriented businesses expressing greater wage pressures.


Business contacts reported prices for finished goods and services grew slightly over the last month, with declines in auto prices being a notable exception. Growth in input costs continued to outpace selling prices. Amid difficulties to pass higher materials and input costs onto customers, many contacts reported being willing to change selling prices more frequently compared to last year to protect margins when possible. Contacts also reported implementing several new strategies to alleviate cost pressures arising from suppliers for the coming year. Specifically, many businesses reported they are entering shorter duration contracts with vendors, adding escalation clauses that cap cost growth, or including new clauses to allow for renegotiation upon unanticipated cost changes.

Consumer Spending

Consumer spending rose moderately driven by increases in hotel stays, outings to restaurants, and other services. Spending on services and parts for auto repairs grew at a robust rate as households increasingly repaired and maintained their vehicles. Recent declines in auto prices from pandemic-era highs reduced trade-in values for used cars purchased two to three years ago. Those lower trade-in values, combined with the propensity to purchase cars with extended term financing in recent years, meant that many car owners could not exit their loans and instead elected to repair and maintain their current vehicles in lieu of trading in for new cars.

Community Conditions

The availability of jobs for low-wage workers was reportedly high, and contacts indicated the entry-level job market is still tilted in job seekers' favor. However, a few noted that some employers were bringing back restrictions on hiring such as background checks and drug testing. High prices of vehicles and rising costs of repairs and auto insurance continue to present barriers to work for low-wage workers. Additionally, contacts noted the preponderance of new jobs locating on the fringes of metro areas has made those jobs more difficult to reach for low-to-moderate income households. Contacts noted the benefits of switching jobs lessened considerably for workers, but the tendency to switch jobs for even marginal wage gains remains elevated.

Manufacturing and Other Business Activity

Business activity expanded at a moderate pace, led by robust growth among both consumer and professional service providers. Manufacturing contacts continued to report moderate and broad-based declines in activity. Compared to 6 months ago, contacts generally reported more optimism about avoiding the need to lay off workers if activity were to meaningfully slow. Instead, more firms reported they would reduce the number of open positions and reduce hours worked if demand were to decline significantly. Slightly more businesses expressed they would likely reduce headcount through natural attrition if conditions were to deteriorate, even as turnover continued to decline. Given current conditions, most employers expected modest job gains over the next six months.

Real Estate and Construction

Many aspects of commercial real estate (CRE) activity that were declining for several quarters reportedly stabilized over the past month, albeit at low levels. However, ongoing increases in vacancy rates kept downward pressure on rents. Property sales rose moderately throughout the District with slight increases in transaction prices, though contacts noted more self-funded equity was needed to finance deals. Contacts reported only modest increases in private equity funding being deployed but generally indicated that substantial amounts of equity remained on the sidelines. Bank lending and lending from insurance companies to the CRE sector reportedly declined recently. Despite the reportedly tight financial conditions, District contacts' expectations regarding property valuations improved moderately compared to earlier in the year.

Community and Regional Banking

Loan demand was mostly unchanged at District banks from the previous month, except for CRE loans, which declined due to higher financing costs. Contacts also noted portfolio credit quality was mostly unchanged and they largely expected similar loan quality in the coming six months. Bankers indicated that less than 10 percent of their CRE borrowers had exercised extensions in the past six months and expect less than 5 percent to require an extension in the coming six months, highlighting contacts' cautious optimism about CRE loans despite elevated interest rates. Deposits were unchanged on net amid short seasonal fluctuations driven by tax payments.


Tenth District oil and gas activity declined slightly over the last month. The number of active rigs fell as oil prices declined, and production in the District's major basins decreased modestly. Coal production in Wyoming also fell moderately over the last month due to a continued decline in price. Contacts indicated capital expenditures to support coal mining were increasingly oriented toward maintaining equipment, rather than expanding capacity. Renewable energy capacity has grown at a moderate pace in the District this year, driven by wind installations in Oklahoma and solar installations in New Mexico. However, District growth in non-wind renewable capacity lags the U.S. and is expected to continue underperforming the national average in coming months.


Conditions in the Tenth District agricultural economy softened through early May and farm finances tightened slightly. Corn, soybean, and wheat prices increased slightly since April, but remained weak, keeping profit opportunities narrow. Winter wheat conditions in Colorado and Kansas were particularly poor and raised concerns about reduced revenues while growing conditions in Oklahoma and Nebraska were comparatively better. Corn and soybean planting was delayed in some areas of the region, which also raised concerns about future crop conditions. In the livestock sector, cattle prices remained strong and supported profit opportunities for cow/calf producers. District contacts mentioned that financial stress has remained modest, but concerns about further deterioration were growing.

For more information about District economic conditions visit: https://www.KansasCityFed.org/research/regional-research.

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Last Update: May 29, 2024