Texas service sector flat, retail sales fall in November

The Texas service sector — already battered by the coronavirus pandemic — remained flat in November, while retail sales for the month fell, according to the latest report from the Federal Reserve of Dallas.

The Dallas Fed’s Texas Service Outlook Survey takes the pulse of executives in the service industry, which includes retail, hospitality, professional and technical services and other businesses.

“Texas service sector activity flattened out in November, with revenue and labor market indicators suggesting little change compared with last month,” said Christopher Slijk, Dallas Fed associate economist. “Firms were less optimistic in their assessment of business conditions, and outlooks were roughly unchanged.”

The state revenue index, a key measure of the service sector, declined nearly eight points to -0.7.

Positive numbers in the index reflect expansion, while negative numbers reflect contraction. A March reading of -66 was the lowest since collection of the data began in 2007.

Labor market indicators were roughly unchanged, with the employment index holding near 0, the survey said. The general business activity index dropped to -2.6, its first negative reading since July.

Private service-providing businesses account for nearly 70% of the state’s economy and employ about 8.6 million workers, according to the Dallas Fed.

Restaurants, bars, hotels and related businesses in the Austin metro area have been slammed by the pandemic, and shed nearly 70,000 workers in March and April, according to the Texas Workforce Commission.

Austin’s leisure and hospitality industry did generate job growth in October, adding 3,000 jobs. However, local employment in the sector remains down 22% from a year ago, for an overall decrease of more than 30,000.

“Hotel bookings have now declined for the third straight week, indicating that the various lockdowns and surging of the virus are starting to impact travel and hotel reservations,” one executive in the hospitality industry said in the anonymous survey.

An executive in educational services said a lot will be riding on the upcoming Texas legislative session, which starts in January. “We are highly dependent on the state of Texas budget,” the executive said. “The uncertainty about how that will unfold when the Legislature meets is causing us to conserve resources now in anticipation of a probable, but unknown size cut in our state budget allocation.”

The Dallas Fed survey includes a retail section that is based on information from respondents in the retail and wholesale sectors only. According to those surveyed, retail sales activity fell in November after posting two consecutive months of growth.

“Texas retailers saw a decline in November activity, with retail sales falling and employment indicators remaining negative,” Slijk said. “Outlooks plateaued, while perceived business conditions worsened compared with October.”

The sales index fell nearly 12 points to -6.5, suggesting a pullback in activity, according to the Dallas Fed.

The continued threat of virus surges and shutdowns is wreaking havoc on small retailers and other businesses, one real estate executive said.

“We are seeing optimism with the pending approval of the vaccines, but the continued mandated shutdowns will create many more problems for tenants just as they were beginning to see some light at the end of the tunnel,” the executive said. “This mandated closing and the picking of winners and losers by calling some “essential businesses” is killing our small business tenants and pushing business to the big retailers.”

Originally posted on: https://www.statesman.com/business/20201201/texas-service-sector-flat-retail-sales-fall-in-november