Despite the challenges, the Texas manufacturing and service sectors continue to grow



Despite the continued challenges created by the coronavirus pandemic and supply chain issues, Texas’ manufacturing and service sectors both saw growth in November.

These are the findings of Federal Reserve Bank of Dallas surveys that take the pulse of executives in the manufacturing and service sectors. The service sector includes retail, hospitality, professional and technical services, and other businesses.

In the Texas manufacturing sector, respondents to the anonymous survey said rising costs and labor shortages continue to be a problem.

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“The pace of expansion of the Texas manufacturing sector has accelerated, despite widespread supply chain disruptions and difficulties in finding workers,” said Emily Kerr, senior business economist for the Dallas Fed. . wages.”

A majority of manufacturers said they expected supply disruptions to persist for more than six months, and more than half of companies said they had raised wages by at least 4% in the past year .

The manufacturing survey received responses from 360 business leaders from November 15 to 23. Among the discoveries:

  • The production index rose three points to 24.2, a value well above average and indicative of solid production growth.
  • The new orders index stood at 9.5, down from 15.6 but still slightly above the series average.
  • Among companies noting supply chain disruptions, 52% said they worsened in the past month.
  • Just over half of companies were currently trying to fill entry-level positions. Mid-level employees were also hard to find, with 52% saying it was very difficult.

A respondent from the plastics manufacturing industry said, “Retention is the new normal. Just like we hire one, another part. time will tell if these adjustments will have an impact. “

Further, the respondent said, “As they have been doing all year, supply chain issues continue to lead to price increases, delivery issues and late orders. Many vendors cite that things will recover at the end of January. We’ll have to wait and see what happens. . “

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The service sector is accelerating

In the service sector in Texas, which has seen a checkered performance in recent months, the pace of expansion has jumped, according to the Dallas Fed survey.

Private service companies make up nearly 70% of the state’s economy and employ about 8.6 million workers, according to the Dallas Fed.

“Texas service sector activity picked up in November, with revenue growth rising sharply to a seven-month high,” said Christopher Slijk, associate economist at the Dallas Fed. “The pressures on prices and wages have reached unprecedented heights in the 14 years of the survey’s existence. Sentiment on current and future trading conditions suggests increased optimism compared to October. “

The government revenue index, a key measure of the service sector, rose six points to 25.4, its best reading since April. Positive numbers in the index reflect expansion, while negative numbers reflect contraction. A reading of -66 in March 2020 was the lowest since 2007.

Labor market indicators remained positive and the part-time employment index reached its highest level since 2007.

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Employee Ari Darocy Offer, right, helps Jerry Conway shop for a hat at Cavender's Boot City on South Lamar Boulevard in Austin on November 19.  Despite labor and supply issues, retail activity in Texas was strong in November, according to a survey by the Federal Reserve Bank of Dallas.

The Dallas Fed survey includes a section on retail based on information provided by respondents from the Texas retail and wholesale sectors only.

“Retail activity in Texas has rebounded, as the survey’s sales index hit its highest level in 17 months,” Slijk said. “Hiring has picked up and retailers’ sentiment about current business conditions has improved. Pressure on prices and wages reached record levels in November. “

One wholesaler said, “Company-wide, we will increase everyone’s wages by 4 to 5% by the end of this year. We will also grant an end of year bonus.

A motor vehicle and parts dealer added: “Significantly increasing hourly wages to hire low-skilled or unskilled positions requires a general increase of all existing employees with similar pay; otherwise, you lose those people because of a lack of equity in pay. Balance.”



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