A number of indicators of economic activity for the Eleventh District continue to show strength, although others demonstrate some weakness. Employment in the five southwestern states rose to record levels in July, department store sales continued strong, and crop prospects remain good to excellent. Yet, in July, industrial production in Texas moved down and registrations of new passenger automobiles in the largest cities of the state declined. Moreover, total loans at District weekly reporting banks fell slightly during the month of August.

Seasonally adjusted total employment in the five southwestern states rose to a new high level in July, following an upward revision in the number of people employed in June. Total employment was higher than a year before, and even with a slight increase in the labor force, the unemployment rate dropped to 3.8 percent in July.

Manufacturing employment was essentially unchanged, as gains in the employment at durable goods producers were offset by declines at nondurables plants. The advance in nonmanufacturing employment was paced by new hirings for construction and government jobs. All categories of industry were well above their employment levels of a year earlier.

The seasonally adjusted Texas industrial production index fell in July but remained 6.0 percent higher than a year earlier. The decline was the largest since August of last year. All major components of the index except utilities contributed to the reduction.

Department store sales in the Eleventh District were 13 percent higher in the four weeks ended August 25 than in the comparable period last year. Cumulative year-to-date sales were also 13 percent above the corresponding period in 1972. Registrations of new passenger automobiles in Dallas, Fort Worth, Houston, and San Antonio declined in July but still remained higher than in July of last year. Cumulative registrations for the first seven months of 1973 were 8 percent above the same period in 1972.

Agricultural activities in the Eleventh District continue slightly behind normal schedule, but general crop prospects remain good to excellent. Harvest activity for corn, sorghum, and cotton is gaining momentum; soybean crops are showing excellent progress; and seedbed preparation is under way for wheat and winter vegetables. The rice harvest is sharply behind last year though yields have been very good. Texas and Louisiana could suffer some losses to rice and cotton as a result of tropical storm Delia.

Texas and Arizona reported a total of over 2.8 million head of cattle and calves on feed as of August 1. The 2.3 million head in Texas was 9 percent above a year earlier but slightly below July 1. Arizona had a small gain on a year-to-year basis but showed a 15 percent decline from the preceding month. July marketings in both states were above year-ago levels. But placements continued sharply below both those in the previous month and in July of last year, apparently as animals are being held on pasture. Texas cattle slaughter in July also was down from both June and year-ago levels. However, the total for the first seven months continued 1 percent above 1972, in contrast to the 5 percent decline nationally.

Total credit at weekly reporting banks in the Eleventh District decreased slightly during the month of August. The decline which was represented in a fall in both loans and investments, was accompanied by a sizable outflow of deposits. Total loans edged downward during the month, primarily reflecting a substantial fall in business loan demand. The drop in business loans, however, resulted mainly from reductions in bankers' acceptances at one large bank.

Construction activity in the District was brisk and demand for real estate loans remained high. Growth in consumer loans at District banks was still strong, as borrowers apparently continue to use bank credit to finance purchases of automobiles and other durable goods.

Despite the decline in the overall demand for loans, District reporting banks on balance reduced their security holdings. They did add a substantial volume of Government issues, mainly Treasury bills, to their investment portfolios; but decreases in other security holdings, primarily municipal issues, more than offset the rise in bills.