Wages
More Texas service companies reported rising wage and benefit costs in October than at any point since January 2023, even as hiring grew only slightly, according to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey released Tuesday, Oct. 27.
The survey’s wages and benefits index rose 5.4 points to 20.5, its highest reading since January 2023 and well above its series average of 15.4. Some 21.2% of responding firms said wages and benefits increased from the prior month, 78.1% reported no change and 0.7% reported a decrease.
Employment barely moved. The employment index edged down to 2.8 from 4.1, below its series average of 5.6 but still positive, meaning slightly more firms added workers than cut them. About 11.9% of firms reported higher employment, 79.0% no change and 9.1% lower employment. The part-time employment index slipped to 2.6 from 4.0, and the hours worked index rose to 2.2 from 0.1.
Each index is the share of firms reporting an increase minus the share reporting a decrease, so a reading above zero signals growth from the prior month. Data were collected Oct. 13 through Oct. 21, and 224 of the 342 Texas service sector executives surveyed responded. This month’s release also includes the Dallas Fed’s annual seasonal adjustment revisions, which slightly change historical seasonally adjusted figures.
Activity resumed after a flat September
The Dallas Fed said Texas service sector activity grew in October after stalling in September. The revenue index, its key measure of conditions, rose to 4.4 from -0.9. The general business activity index turned positive at 4.0, up from -1.8, and the company outlook index rose to 3.0 from -3.2. The outlook uncertainty index fell to 16.3 from 21.4.
Prices stayed high. The input prices index was little changed at 41.7, far above its 28.0 series average, and the selling prices index rose to 18.2 from 14.9.
Looking six months ahead, firms remained positive on hiring and pay. The future employment index was 26.5, down slightly from 27.7, with 34.7% of firms expecting to add workers and 8.2% expecting cuts. The future wages and benefits index rose to 49.4 from 47.1, with half of firms (50.6%) expecting labor costs to rise. The future revenue index climbed to 43.6 from 38.2.
Respondents describe a tight market for some skills
Several executives said finding workers remained hard. A respondent in administrative and support services wrote that “professional-level hiring seems to have cooled slightly” but that demand remained strong for mid- to lower-level hourly positions, particularly with manufacturing clients. The same respondent said “strong quality candidates receive multiple offers, and the majority of offers are now above requested salaries.”
A professional, scientific and technical services firm said “hiring engineers and technicians is very challenging” and cited federal immigration policy as making it harder to hire legal immigrants. A repair and maintenance respondent wrote that “data centers are actively recruiting local companies’ employees and inflating wages.” A securities and investments firm reported that “increased competition for talent is leading to upward pressure on wages and benefits.”
Other comments pointed to caution. A small professional services firm said it was staying at four people without adding staff because the economy did not feel stable enough, and another securities respondent said its focus was “efficiency with existing labor.” A warehousing and storage company said it expected to continue its hiring push to support growth in South Texas.
What it means for workers
For Texas service workers, the October survey points to rising pay pressure in a market where headcount growth is slow. The results reflect a survey of executives, not payroll counts, and the comments represent individual firms, not the sector as a whole. The next release is scheduled for Dec. 1.
Sources
- Federal Reserve Bank of Dallas, “Growth resumes in Texas service sector activity,” October 27, 2026. https://www.dallasfed.org/research/surveys/tssos/2026/2610
Featured photo: The Federal Reserve Bank Building in Dallas, Texas, seen from Klyde Warren Park, Feb. 2, 2013. Photo: Joe Mabel, via Wikimedia Commons (CC BY-SA 3.0). Cropped from the original.
