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Signs of Slowdown Growing in Texas; Price Pressures Ease – Federal Reserve Bank of Dallas

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Economic analysis and insights from the Federal Reserve Bank of Dallas
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Mytiah Caldwell and Yichen Su

The Texas economy continued expanding in June and July, though at a decelerating pace compared with earlier this year. There are increasing signs of slowing activity—particularly weakening demand in manufacturing—even as overall job growth remains strong.
Business outlooks were negative, and price and wage pressures eased in July. Home prices in some metros appear to have peaked, and apartment rent increases are slowing.
Texas employment growth accelerated to an annualized 7.3 percent in June, exceeding the downwardly revised 5.6 percent rate in May. The state’s expansion was broad based during the second quarter. Texas outpaced the nation in all sectors except government (Chart 1).
Chart 1: Second-Quarter Texas Job Growth Exceeded U.S. in All Sectors, Except Government
Downloadable chart | Chart data
The fastest-growing sector was energy, where employment increased at an annualized 22 percent rate. The information, leisure and hospitality, and construction sectors also strongly expanded in the second quarter. Dallas and Houston led the major Texas metropolitan areas in employment during the quarter, with Dallas gaining 9.7 percent on an annualized basis and Houston rising 7.7 percent.
The Dallas Fed’s Texas employment forecast projects 4.5 percent growth this year (December over December), an upward revision from the previous forecast because of the strong June performance. Those gains pushed the growth rate in the first half of the year to an annualized 5.8 percent. While the employment forecast implies a slowing in the second half, the state should still exceed its historical average of 2 percent growth.
The Texas unemployment rate dropped to 4.1 percent in June from 4.2 percent in May. The jobless rates for Black and Hispanic workers decreased more than for white workers over the first half of the year. The improvement indicates that the racial gap in unemployment rates observed during the height of the COVID-19 pandemic has narrowed considerably this year.
The Texas economy expanded in June and July, although the pace of growth slowed considerably compared with earlier this year, according to Dallas Fed’s Texas Business Outlook Surveys (TBOS). The manufacturing production index increased from 2.3 to 3.8 from June to July, while the service sector revenue index was largely unchanged (Chart 2). TBOS indexes are diffusion indexes, with positive values typically indicating growth and negative ones reflecting contraction.
Chart 2: Texas Economy Continues to Expand, Though at a Slower Pace
Downloadable chart | Chart data
While manufacturing production growth remained positive, indexes of manufacturing demand such as new orders and the growth rate of orders indicated contraction in June and July, reaching their lowest levels since mid-2020.
The retail sector has struggled this year, with sales falling at an accelerating rate. Despite the weakness reported by retailers, state sales tax revenue rose 16.4 percent year over year in June, suggesting spending has gained relative to last year.
In June, TBOS survey respondents were asked a special question about constraints on revenue. Responses suggest that weak demand increasingly limited firms’ revenue; 26 percent of firms pointed to weak demand in June, compared with 15 percent in March 2022.
Supply-chain constraints and labor shortages remained the top challenges cited. Additionally, TBOS special questions in July show the share of businesses looking to hire workers has decreased since April, reaching its lowest point in over a year. Even with slightly reduced labor demand, most survey respondents reported that hiring remains troublesome, though the difficulty filling low- and mid-skill positions moderated in July relative to November 2021, when this question was last asked.
Despite the continued expansion, firms’ outlooks were pessimistic in June and July (Chart 3). Businesses expressed increasing uncertainty and worry about a potential economic slowdown.
Chart 3: Firms' Outlooks Worsened in June, July; Uncertainty Increased
Downloadable chart | Chart data
Still, since energy production makes up a larger portion of the Texas economy than it does of the national economy, the state usually outperforms the U.S. when oil and gas prices are high. Chart 4 plots the Texas job growth premium (Texas 12-month job growth rates minus the national 12-month job growth rate) and the concurrent series of benchmark West Texas Intermediate oil prices.
Chart 4: Texas Often Outperforms the U.S. Economy When Oil Price is High
Downloadable chart | Chart data
The chart depicts a strong degree of co-movement between those two series. In the event of a national slowdown or a recession, this relationship suggests that the Texas economy may outperform the nation given recent high oil and gas prices.
The housing market is showing signs of slowing. The months-of-supply of homes across Texas metros was higher in June than at the same time last year. In particular, Austin experienced a more rapid increase in homes for sale than other metros, and the number of sales dropped more quickly than in other areas. The rate of increase in home prices slowed in June, with the median price plateauing in Houston and San Antonio and declining slightly in Austin.
Rent growth similarly decelerated across Texas metros, with Austin experiencing the most pronounced slowdown after a year of rising rents that led other Texas metros in 2021. Apartment occupancy rates have remained high over the past few months.
The Dallas Fed’s Banking Conditions Survey shows continued growth in loan volume in June, though residential real estate lending was flat. Texas financial institutions expect loan demand to weaken in coming months.
Price pressures have grown—the Houston metro’s Consumer Price Index (CPI) for June, which reached an annualized 10.2 percent, topped the 9.1 percent national CPI reading. In particular, energy and food prices rose more in Houston than in the U.S.
However, TBOS results indicate that upward price pressure in Texas likely eased in July (Chart 5).
Chart 5: Upward Price Pressure Eased in July, Texas Business Outlook Survey Indicates
Downloadable chart | Chart data
The manufacturing input price index decreased sharply, from 57.5 in June to 38.4 in July. The service sector input and selling price diffusion indexes also declined after remaining at highs through June. Based on the survey results, inflation appears to have slowed in Texas in July.
Mytiah Caldwell
Caldwell is a research analyst at the Federal Reserve Bank of Dallas.
Yichen Su
Su is a research economist at the Federal Reserve Bank of Dallas.
The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.
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Austin Local News

The wait is over as Powerball finally has a winner for its jackpot worth over $1 billion

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The wait is over as Powerball finally has a winner for its jackpot worth over $1 billion

LOS ANGELES (AP) — A tiny neighborhood store in downtown Los Angeles sold the winning ticket for the Powerball jackpot worth an estimated $1.08 billion, the sixth largest in U.S. history and the third largest in the history of the game.

The winning numbers for Wednesday night’s drawing were: white balls 7, 10, 11, 13, 24 and red Powerball 24.

The winner can choose either the total jackpot paid out in yearly increments or a $558.1 million lump sum before taxes. Winners don’t have to come forward publicly but their names and the disposition of the money are public records, according to the California Lottery.

The winning ticket was sold at Las Palmitas Mini Market, which will receive a $1 million bonus from the lottery. The owner of the store is Maria Leticia Menjivar, lottery spokesperson Carolyn Becker said.

Lottery officials presented a giant symbolic check to the owner and her family, including her husband Navor Herrera, the manager, and hung signs saying “billionaire made here.”

Asked about the store’s million-dollar windfall, Herrera set his sights on the future.

“I have to make more bigger store, more items, good service for the people. That’s my thing now,” he said.

“The store is small” but the luck there is “big,” Herrera joked.

Located in the city’s Fashion District, the narrow minimarket is a few blocks from Skid Row’s scenes of homelessness and distress where thousands of people live in makeshift shanties that line entire blocks of the neighborhood.

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The 107-block district is both a center of the West Coast apparel industry as well as a low-income area where small stores offer clothing, accessories and fabrics that spill onto sidewalks. Bargain-seekers flock to the district, but many storefronts are shuttered.

The winner must come forward to the California Lottery to claim the prize — and should consider hiring financial and legal advisers, spokesperson Carolyn Becker told reporters.

“And then we have to spend time vetting the winner to make sure it is the right person,” Becker said. “Integrity and transparency are incredibly important to us, so we will probably not know for months and months.”

A crush of reporters descended on the narrow minimarket, creating an early morning stir.

Lucy Jamil, who works nearby, came to the market after hearing the jackpot news.

“I’m very excited — very, very excited,” said Jamil, an employee at a store selling items such as backpacks, strollers and makeup boxes. “This morning when I woke up I was praying to God, you know, God willing it’s gonna be somebody who works over here.”

Final ticket sales pushed the jackpot beyond its earlier estimate of $1 billion to $1.08 billion at the time of the drawing, moving it from the seventh largest to the sixth largest U.S lottery jackpot ever won.

The game’s abysmal odds of 1 in 292.2 million are designed to build big prizes that draw more players.

The largest Powerball jackpot was $2.04 billion in November, also in California, making Thursday the second time in less than a year that someone in Los Angeles County has become a Powerball billionaire.

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The last time anyone won the Powerball jackpot was on April 19 for a top prize of nearly $253 million.

Powerball is played in 45 states, as well as Washington, D.C., Puerto Rico and the U.S. Virgin Islands.

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Associated Press writers John Antczak and Amancai Biraben contributed.

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This story has been corrected to fix the spelling of Navor Herrera’s first name. It is Navor, not Nabor. It has also been corrected to show that Herrera is the store’s manager, not the owner.

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Austin Local News

Body recovered from Lady Bird Lake Tuesday

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AUSTIN (AustinEnquirer.com) — A somber discovery unfolded on Tuesday morning as the Austin Fire Department retrieved the lifeless body of an unidentified man from the tranquil waters of Lady Bird Lake. The tragic event occurred in the vicinity of 1000 W. Cesar Chavez St., near the convergence of Barton Creek with the lake.

During a press conference, the Austin Police Department revealed that the circumstances surrounding the man’s untimely demise remain shrouded in mystery, prompting an ongoing investigation to uncover the truth behind this unsettling incident.

Prompted by an emergency call at precisely 10:28 a.m., the Austin Fire Department swiftly responded to the distressing scene. Despite their valiant efforts, the man was pronounced dead at 10:59 a.m., leaving the community shaken and searching for answers.

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Austin Local News

TX power grid says cut electricity use as heat wave scorches…

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TX power grid says cut electricity use as heat wave scorches…

AUSTIN, Texas (AP) — Texas’ power grid operator asked residents Tuesday to voluntarily cut back on electricity due to anticipated record demand on the system as a heat wave kept large swaths of the state and southern U.S. in triple-digit temperatures.

On the last day of spring, the sweltering heat felt more like the middle of summer across the South, where patience was growing thin over outages that have persisted since weekend storms and tornadoes caused widespread damage.

In the Mississippi capital, some residents said Tuesday that they had been without power and air conditioning for almost 100 hours, which is longer than the outages caused by Hurricane Katrina in 2005. Entergy Mississippi, the state’s largest electric utility, said its crews had worked 16-hour shifts since Friday, but some officials expressed doubts about its preparedness.

High temperatures in the state were expected to reach 90 degrees (32 degrees Celsius) on Tuesday.

“The delay in restoring power has caused significant hardship for their customers and it is unacceptable,” said Brent Bailey, a member on the Mississippi Public Service Commission, the state’s energy regulator.

The request by the Electric Reliability Council of Texas, which serves most of that state’s nearly 30 million residents, was its first of the year to cut energy consumption. ERCOT said it was “not experiencing emergency conditions,” but it noted that the state set an unofficial June record on Monday for energy demand.

In the oil patch of West Texas, temperatures in San Angelo soared to an all-time high of 114 degrees (46 degrees Celsius) on Tuesday, according to the National Weather Service.

Many Texans have been skeptical of the state’s grid since a deadly 2021 ice storm knocked out power to millions of customers for days. Republican Gov. Greg Abbott has said improvements since then have made the grid more stable, but those improvement efforts continue to draw scrutiny.

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In neighboring Oklahoma, more than 100,000 customers were eagerly awaiting the restoration of power and air conditioning following weekend storms that downed trees and snapped hundreds of utility poles. Officials say at least one person in Oklahoma has died because of the prolonged outages, which could last into the weekend for some residents.

Arkansas Gov. Sarah Huckabee Sanders on Tuesday declared a state of emergency because of the weekend’s storms, citing damage from the weather and “numerous” downed power lines.

In Louisiana, more than 51,000 electricity customers were still without power Tuesday because of the storms that damaged more than 800 structures around Shreveport alone, according to Mayor Tom Arceneaux. Officials said more than a dozen major transmission lines were still awaiting repairs.

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Associated Press writers Michael Goldberg in Jackson, Mississippi, and Andrew DeMillo in Little Rock, Arkansas, contributed to this report.

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