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Signs of Slowdown Growing in Texas; Price Pressures Ease – 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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Remember last year’s Memorial Day travel jams? Chances are they will be much worse this year

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Remember last year’s Memorial Day travel jams? Chances are they will be much worse this year

The patience of Memorial Day weekend travelers was tested Thursday by widespread delays across the country, but there were relatively few canceled flights, raising hopes that airlines can handle bigger crowds expected Friday.

By early evening on the East Coast, more than 6,000 flights had been delayed Thursday, with the biggest backups at the three major airports in the New York City area and Dallas-Fort Worth International.

 

 

 

 

 

 

Pasha Pidlubniak waits for a domestic flight at Miami International Airport, Thursday, May 23, 2024, in Miami. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/Lynne Sladky)

 

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Pasha Pidlubniak waits for a domestic flight at Miami International Airport, Thursday, May 23, 2024, in Miami. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/Lynne Sladky)

 

The Transportation Security Administration predicted that Friday will be the busiest day for air travel over the holiday weekend, with nearly 3 million people expected to pass through airport checkpoints. It could rival the record of 2.9 million, set on the Sunday after Thanksgiving last year.

“Airports are going to be more packed than we have seen in 20 years,” said Aixa Diaz, a spokesperson for AAA.

When they aren’t waiting out flight delays, travelers are reporting sticker shock at the prices.

At Chicago’s O’Hare Airport, Larisa Latimer of New Lenox, Illinois, said her airfare was reasonable but other expenses for a getaway to New Orleans were not.

 

 

 

 

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Motorists travel along Interstate 24 near the Interstate 40 interchange Thursday, May 23, 2024, in Nashville, Tenn. A record number of Americans are expected to hit the pavement over the 2024 Memorial Day holiday. (AP Photo/George Walker IV)

 

Motorists travel along Interstate 24 near the Interstate 40 interchange Thursday, May 23, 2024, in Nashville, Tenn. A record number of Americans are expected to hit the pavement over the 2024 Memorial Day holiday. (AP Photo/George Walker IV)

 

“I just have to make the accommodation,” she said. “The rental car is up … this year, the hotel accommodations were very unusually expensive.”

Kathy Larko of Fort Meyers, Florida, used frequent-flyer miles — and some flexible scheduling — to pay for her trip to Chicago.

“I’m really conscious of looking at the cost of the entire trip. We’re staying a little farther out than we normally would” to get a lower hotel rate, she said. “We’re also flying back a day later, because we could get cheaper miles.”

More travelers will be on the road. AAA estimates that 43.8 million people will venture at least 50 miles (80 kilometers) from home between Thursday and Monday, with 38 million of them taking vehicles.

 
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Travelers wait at a TSA checkpoint at the Los Angeles International Airport, Thursday, May 23, 2024, in Los Angeles. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/Ryan Sun)

 

Travelers wait at a TSA checkpoint at the Los Angeles International Airport, Thursday, May 23, 2024, in Los Angeles. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/Ryan Sun)

 

Airport unions are using the holiday weekend to highlight their demands.

About 100 workers who clean airplane cabins and drive trash trucks at the airport in Charlotte, North Carolina, started a 24-hour strike Thursday, demanding better pay and healthcare, according to the Service Employees International Union. About 15% of flights were delayed, but it was unclear whether the strike played any role.

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A planned strike at John F. Kennedy Airport in New York was averted, however. Teamsters Local 553, which represents about 300 workers who refuel passenger and cargo jets at JFK, said that it reached a settlement with Allied Aviation Services and called off a walkout planned for Friday.

 

 

 

 

 

 

George Ridley, 4, left, rides on a suitcase as he and his father Chris Ridley make their way through the Nashville international Airport, Thursday, May 23, 2024, in Nashville, Tenn. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/George Walker IV)

 

George Ridley, 4, left, rides on a suitcase as he and his father Chris Ridley make their way through the Nashville international Airport, Thursday, May 23, 2024, in Nashville, Tenn. A record number of Americans are expected to travel over the 2024 Memorial Day holiday. (AP Photo/George Walker IV)

 

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“We are happy an agreement has been reached, a need for a strike averted, and we are hopeful that the deal will be ratified by our members,” said Demos Demopoulos, the secretary-treasurer of the local.

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Associated Press video journalist Melissa Perez Winder in Chicago and Associated Press radio reporter Shelley Adler in Washington contributed to this report.

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Texas health department appoints anti-abortion OB-GYN to maternal mortality committee

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Texas health department appoints anti-abortion OB-GYN to maternal mortality committee

AUSTIN, Texas (AP) — Texas’ health department has appointed an outspoken anti-abortion OB-GYN to a committee that reviews pregnancy-related deaths as doctors have been warning that the state’s restrictive abortion ban puts women’s lives at risk.

Dr. Ingrid Skop was among the new appointees to the Texas Maternal Morality and Morbidity Review Committee announced last week by the Texas Department of State Health Services. Her term starts June 1.

The committee, which compiles data on pregnancy-related deaths, makes recommendations to the Legislature on best practices and policy changes and is expected to assess the impact of abortion laws on maternal mortality.

Skop, who has worked as an OB-GYN for over three decades, is vice president and director of medical affairs for the Charlotte Lozier Institute, an anti-abortion research group. Skop will be the committee’s rural representative.

Skop, who has worked in San Antonio for most of her career, told the Houston Chronicle that she has “often cared for women traveling long distances from rural Texas maternity deserts, including women suffering complications from abortions.”

Texas has one of the most restrictive abortion bans in the U.S., and doctors have sought clarity on the state’s medical exemption, which allows an abortion to save a woman’s life or prevent the impairment of a major bodily function. Doctors have said the exemption is too vague, making it difficult to offer life-saving care for fear of repercussions. A doctor convicted of providing an illegal abortion in Texas can face up to 99 years in prison and a $100,000 fine and lose their medical license.

Skop has said medical associations are not giving doctors the proper guidance on the matter. She has also shared more controversial views, saying during a congressional hearing in 2021 that rape or incest victims as young as 9 or 10 could carry pregnancies to term.

Texas’ abortion ban has no exemption for cases of rape or incest.

The American College of Obstetricians and Gynecologists, which says abortion is “inherently tied to maternal health,” said in a statement that members of the Texas committee should be “unbiased, free of conflicts of interest and focused on the appropriate standards of care.” The organization noted that bias against abortion has already led to “compromised” analyses, citing a research articles co-authored by Skop and others affiliated with the Charlotte Lozier Institute.

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Earlier this year a medical journal retracted studies supported by the Charlotte Lozier Institute claiming to show harms of the abortion pill mifepristone, citing conflicts of interests by the authors and flaws in their research. Two of the studies were cited in a pivotal Texas court ruling that has threatened access to the drug.

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Uvalde shooting families sue Texas police over botched response

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Uvalde shooting families sue Texas police over botched response

AUSTIN, Texas (AP) — The families of 19 of the victims in the Uvalde elementary school shooting in Texas on Wednesday filed a $500 million federal lawsuit against nearly 100 state police officers who were part of the botched law enforcement response to one of the deadliest school shootings in U.S. history.

The families said they also agreed to a $2 million settlement with the city, under which city leaders promised higher standards and better training for local police.

The lawsuit and settlement announcement in Uvalde came two days before the two-year anniversary of the massacre. Nineteen fourth-graders and two teachers were killed on May 24, 2022, when a teenage gunman burst into their classroom at Robb Elementary School and began shooting.

The lawsuit, seeking at least $500 million in damages, is the latest of several seeking accountability for the law enforcement response. More than 370 federal, state and local officers converged on the scene, but they waited more than 70 minutes before confronting the shooter.

It is the first lawsuit to be filed after a 600-page Justice Department report was released in January that catalogued “cascading failures” in training, communication, leadership and technology problems that day.

The lawsuit notes that state troopers did not follow their active shooter training or confront the shooter, even as the students and teachers inside were following their own lockdown protocols of turning off lights, locking doors and staying silent.

“The protocols trap teachers and students inside, leaving them fully reliant on law enforcement to respond quickly and effectively,” the families and their attorneys said in a statement.

Terrified students inside the classroom called 911 as agonized parents begged officers — some of whom could hear shots being fired while they stood in a hallway — to go in. A tactical team of officers eventually went into the classroom and killed the shooter.

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“Law enforcement’s inaction that day was a complete and absolute betrayal of these families and the sons, daughters and mothers they lost,” said Erin Rogiers, one of the attorneys for the families. “TXDPS had the resources, training and firepower to respond appropriately, and they ignored all of it and failed on every level. These families have not only the right but also the responsibility to demand justice.”

A criminal investigation into the police response by Uvalde District Attorney Christina Mitchell’s office is ongoing. A grand jury was summoned this year, and some law enforcement officials have already been called to testify.

 

 

 

 

 

 

 

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A resident arrives for a news conference with families of the victims of the Uvalde elementary school shooting, Wednesday, May 22, 2024, in Uvalde, Texas. The families of 19 of the victims announced a lawsuit against nearly 100 state police officers who were part of the botched law enforcement response. The families say they also agreed a $2 million settlement with the city, under which city leaders promised higher standards and better training for local police. (AP Photo/Eric Gay)

 

A resident arrives for a news conference with families of the victims of the Uvalde elementary school shooting, May 22, 2024, in Uvalde, Texas. (AP Photo/Eric Gay)

 

The latest lawsuit against 92 Texas Department of Public Safety officials and troopers also names the Uvalde School District, former Robb Elementary Principal Mandy Gutierrez and former Uvalde schools police Chief Peter Arredondo as defendants. The state police response was second only to U.S. Border Patrol, which had nearly 150 agents respond.

The list of DPS officials named as defendants includes two troopers who were fired, another who left the agency and several more whom the agency said it investigated. The highest ranking DPS official among the defendants is South Texas Regional Director Victor Escalon.

The Texas DPS told The Associated Press that the agency would not comment on pending litigation.

The plaintiffs are the families of 17 children killed and two more who were wounded. A separate lawsuit filed by different plaintiffs in December 2022 against local and state police, the city, and other school and law enforcement, seeks at least $27 billion and class-action status for survivors. And at least two other lawsuits have been filed against Georgia-based gun manufacturer Daniel Defense, which made the AR-style rifle used by the gunman.

The families said the settlement with the city was capped at $2 million because they didn’t want to bankrupt the city where they still live. The settlement will be paid from the city’s insurance coverage.

“The last thing they want to do was inflict financial hardship on their friend and neighbors in this community. Their friends and neighbors didn’t let them down,” Josh Koskoff, one of the attorneys for the families, said during a news conference in Uvalde on Wednesday.

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The city of Uvalde released a statement saying the settlement would bring “healing and restoration” to the community.

“We will forever be grateful to the victims’ families for working with us over the past year to cultivate an environment of community-wide healing that honors the lives and memories of those we tragically lost. May 24th is our community’s greatest tragedy,” the city said.

But Javier Cazares, the father of slain 9-year-old Jackie Cazares, noted that the announcement — which was made in the same Uvalde Civic Center where the families gathered to be told their children were dead or wounded — was sparsely attended.

“On the way over here, I saw the sticker, which I see everywhere, ‘Uvalde Strong.’ If that was the case, this room should be filled, and then some. Show your support. It’s been an unbearable two years. … No amount of money is worth the lives of our children. Justice and accountability has always been my main concern.”

Under the settlement, the city agreed to a new “fitness for duty” standard and enhanced training for Uvalde police officers. It also establishes May 24 as an annual day of remembrance, a permanent memorial in the city plaza, and support for mental health services for the families and the greater Uvalde area.

The police response to the mass shooting has been criticized and scrutinized by state and federal authorities. A 600-page Justice Department report in January catalogued “cascading failures” in training, communication, leadership and technology problems that day,

Another report commissioned by the city also noted rippling missteps by law enforcement but defended the actions of local police, which sparked anger from victims’ families.

“For two long years, we have languished in pain and without any accountability from the law enforcement agencies and officers who allowed our families to be destroyed that day,” Veronica Luevanos, whose daughter Jailah and nephew Jayce were killed, said Wednesday. “This settlement reflects a first good faith effort, particularly by the City of Uvalde, to begin rebuilding trust in the systems that failed to protect us.”

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