Texas factory activity declined in July, with the production index indicating a modest contraction in output, and the new orders index remaining negative for over a year, according to the Texas Manufacturing Outlook Survey .

The survey was conducted by the Dallas Fed. Emily Kerr, the senior business economist, reported that while employment growth picked up, the manufacturing outlooks deteriorated amid heightened uncertainty, additionally, the survey's special questions on labor market conditions revealed that most Texas firms are currently trying to hire, with a lack of applicants and workers seeking higher pay being the top hiring impediments.

 “The Texas manufacturing sector contracted for a second month, and new orders continue to decline," Kerr said in a statement. "A bright spot in the survey results was that employment growth picked back up, and more than half of responding manufacturers said they are currently trying to hire. Price pressures remained subdued. Looking ahead, manufacturing outlooks deteriorated amid heightened uncertainty.” 

According to a news release, business executives that participated in the Texas Manufacturing Outlook Survey, reported that manufacturing activity in Texas decreased in July. Among the important conclusions from this month's survey were that the  production index remained largely stable at -4.8, which represents a little decline in output. Also, the orders index decreased to -18.1 after being in the red for more than a year.

 According to labor market indicators, employment growth will be faster and workweeks will be longer in July. Although price pressures grew in July, they remained muted, and wage growth slowed, the survey found.The firm outlook index moved further to the downside to -16.9, while the general business activity indicator remained negative but edged up to -20.0.               

The July Texas Business Outlook Surveys included a specific set of questions on the labor market, and the Dallas Fed received responses from 364 business leaders in the services and manufacturing sectors between July 18 and July 26.

 "Most Texas firms report they are currently trying to hire, and a lack of applicants remains the top hiring impediment, though some improvement was reported in applicant availability over the past month," Kerr said. 

Another major issue was employees demanding higher wages than were being offered, the news release said.

The share of firms currently trying to hire rose to 52 percent, up from 50 percent in January but down from 62 percent a year ago. More firms reported looking to hire mid-skill workers than other skill levels, the Fed said. Hiring difficulty was pervasive across skill levels, and the share saying finding workers was “very difficult” was highest for high-skill positions.