Factory jobs booming

Texas manufacturers increased production and hired robustly last month, but the outlook is darkening as interest rates rise, orders shrink and confidence falters, according to a new survey from the Federal Reserve Bank of Dallas.

More manufacturers reported increasing production than reducing it, according to the survey. The production index, which the Dallas Fed bases on the survey, jumped 8 points to 9.3.

But orders are slipping. The new orders index, which measures how many manufacturers have gained orders against those losing them, fell two points to negative 6.3. It's the fourth month the index has stayed in negative territory.

Executives also expressed misgivings about general business conditions.

"There is no optimism in the most positive outlook," said one executive, in transportation equipment manufacturing, adding: "Interest rate hikes will hit our industry hard."

The Federal Reserve last weeks raised its benchmark interest rate by three-quarters of a percentage point. It was the fifth such hike this year and likely not the last, as inflation continues to run near 40-year highs.

Recession fears, meanwhile, are growing. Job growth slowed across the nation in August. The slowdown was particularly sharp in Texas.

Upward pressure on wages has eased slightly, the Dallas Fed survey found. Still, nearly half of respondents cited difficulty in hiring as a factor affecting their business. Nearly half also cited inflation and the potential for recession as among their top worries.

"Uncertainty remains elevated and manufacturers reported that high input costs, labor shortages and weakening demand are primary concerns," said Emily Kerr, senior business economist for the Dallas Fed.

In their comments for the survey, which are reported anonymously, executives described their businesses as being in a somewhat precarious situation, as near-term conditions may be healthy but are not quite aligned with widespread expectations of an impending slowdown.

One machinery manufacturing executive reported hiring a few people this month even though they see the general economic situation worsening. "Our customers are still buying because the oil industry is still making money and they see a bright future," the executive explained.

"Inflation and general uncertainty seem high with customers," said a textile manufacturer. "We expect sales to fall as customers cut discretionary spending."

A food manufacturing executive struck a gloomy note: "There is a decline in optimism with regard to the business climate as well as our ability to stabilize it."