Manufacturing, an economic backstop in shale-rich Texas, is witnessing a drop in payrolls in an otherwise mixed bag, the Federal Reserve Bank of Dallas said.

"Employment reports varied across sectors," the bank said in a report. "Manufacturing and energy services firms continued to trim payrolls."

Apart from oil, Texas is one of the top manufacturing states in the country and the Federal Reserve Bank of Dallas said a stronger dollar, which makes U.S. goods more expensive, continued to put pressure on that part of the state economy.

The bank warned earlier this year that the pressure from low oil prices was spilling over to other parts of the economy, with banks in southern U.S. states facing increasing risk. In its Beige Book, the bank said high-tech manufacturing growth was witnessed across the board, though construction-related manufacturing was mixed.

The Federal Reserve Bank of Dallas said that, even though drilling activity picked up across the state, demand for oilfield services declined. With oil priced in the upper $40-per-barrel range, the bank said companies tied to the oil and gas industry in the state were showing signs of distress.

Karr Ingham, an economist who created a so-called petro index to gauge the health of the industry, said there were "encouraging signs" that the worst was over for the No. 1 oil producer in the country, though some metrics still suggested the state may still be skimming the bottom of a downturn.

Both oil and natural gas production in Texas were down from last year, Ingham said, with oil production off 7.8 percent from July 2015.

"Outlooks were generally positive but cautious, with the upcoming presidential election driving some of the uncertainty," the Dallas bank said. "Several contacts said they believe the worst of the oil bust slump has passed, but that economic growth has not yet returned to normal levels."