Texas energy and services sector experiencing a bit of a slump

June 27 (UPI) -- The service sector in Texas, the second-largest U.S. state economy behind California, is on decline, though market pessimism improved somewhat in June, a survey from the Federal Reserve Bank of Dallas found.

The Dallas Fed reported that its revenue index for the services sector declined by nearly 50% from May. Hiring in the sector accelerated, but the number of hours worked per week was flat relative to the previous month.

The broader outlook, meanwhile, was mixed.

"Perceptions of broader business conditions continued to worsen in June, but pessimism around the outlook waned," the Dallas Fed found.

Federal data from the Labor Department showed employment gains last month were in line with the average of the prior 12 months. In the services sector, the Labor Department reported gains in new hires at food service and drinking establishments.

Employment in that industry, however, is about 2.1% below February 2020 levels, representing the onset of the COVID-19 pandemic in the U.S. economy.

Respondents to the Dallas Fed's survey said summer can be rough for services given the heat and work-from-home trends.

"Workers not in offices is a problem for our industry," one respondent said. "June, July and August can be really bad months."

Costs nationally may be an impediment as well. While on the decline, going out to eat is more expensive than it was last year. Federal data show food away from home is 5.8% more costly than it was in May 2022, the last 12-month period for which the government has data.

A similar standstill is apparent in the Texas energy sector. Respondents to the Dallas Fed's energy survey reported no change in overall activity from May to June. Lower commodity prices and what respondents said was a lack of regulatory certainty were creating headwinds for growth.

Commodity prices are down significantly from year-ago levels. West Texas Intermediate, the U.S. benchmark for the price of oil, topped $110 per barrel on the back of the war premium from Ukraine last year, but was trading Tuesday at around $68 per barrel.

The Dallas Fed found most business executives working in the energy sector expect WTI to average $77.48 per barrel during the second quarter.