Fed: Modest Economic Growth; Shortage of Staffing Talent
Reports from the 12 districts of the Federal Reserve suggest that national economic activity continued to expand at a modest pace from July through late August, according to the Federal Reserve Board’s latest report on regional economies (known as the “beige book”). Most districts reported a modest or moderate pace of overall growth. Manufacturing activity rose slightly in most districts. Labor market conditions remained tight, with moderate payroll growth noted; employment expanded at a moderate pace. In many districts, businesses reported trouble filling job vacancies for high-skilled positions, especially for technology specialists, engineers, and selected construction workers. Staffing services businesses in most districts reported a moderate increase in activity. Contacts across the country expect moderate economic growth in the coming months.
Economic activity continued to increase in the district, although there were scattered signs of slowing growth. Most manufacturing contacts said sales and revenues had increased from a year ago. Business activity in the district’s staffing services industry was mixed—year-to-year revenues were up for a majority of responding firms, with increases ranging from 3% to 30%, but several contacts reported seasonally slow business in the summer. Respondents observed a tight labor market with short supply and strong demand, the latter evidenced by an unusually high number of job postings. They attributed the lack of labor supply to low unemployment and skills mismatch in the labor market, as well as attractive salaries in permanent positions. Looking forward, most firms remained optimistic, though some cited concern over the upcoming November election. They expect continued labor shortages and strong labor demand in the coming months.
There was little to no economic growth in the district since the previous report. Manufacturers reported that business activity was flat; service-sector businesses said that activity declined. The labor market remained tight. Manufacturers and service firms reported little change in staffing levels; service firms scaled back hiring plans in recent weeks, and manufacturers expect staffing levels to be steady to lower in the months ahead. One major New York City employment firm reported that hiring activity remained brisk during the usually slow summer months. Two other firms in the district reported that demand for workers has been steady, at strong levels.
Aggregate business activity in the district grew slightly, but a bit slower than the modest pace reported during the previous period. Manufacturing contacts reported that overall activity had changed little. General activity fell and then rose during the period, orders rose and then fell, and shipments increased throughout the six weeks. Along with these offsetting trends, firms reported that the number of employees and the average employee work hours continued to fall. Overall hiring slowed. Staffing firms reported a modest increase in activity, manufacturers continued to report job cuts, and other sectors noted mixed trends. Firms expect moderate growth over the next six months—a little higher than they reported for the previous period.
Aggregate business activity in the district grew at a modest pace. Manufacturing output increased, though at a slow rate. Commercial builders reported some weakening in the industry’s strong pace of growth but said they expect that it will be a short-term event. Payrolls were little changed on balance over the period. Job gains in construction and banking were offset by losses in manufacturing and freight hauling. Staffing firms noted an increase in the number of job openings and placements, especially for temporary positions. Wage pressures were most evident in the construction and retail sectors across skill levels.
Economic growth in the district slowed. Manufacturing activity was mixed, but firms’ expectations for the next six months were optimistic, and manufacturing employment continued to rise. Commercial leasing increased moderately. Revenues rose somewhat faster at services firms. In the service sector, more retailers were hiring; other firms indicated steady labor demand. The demand for labor increased modestly for workers across all skill levels since the previous report. Turnover rates increased, particularly in entry-level positions. A staffing services firm in Maryland said that some employers were raising starting wages to attract new entry-level workers and to retain existing employees.
According to reports from businesses across the district, economic activity expanded at a modest pace from July through mid-August. The outlook among contacts remained optimistic, as most expect higher growth over the remainder of the year. Manufacturers noted that activity increased slightly since the previous report. Business contacts continued to describe a tightening labor market, with challenges finding workers to fill open positions, particularly in fields that require high skill levels. As a result, contacts from staffing firms noted that demand for recruitment services remained steady. Across the district, firms reported little evidence of wage pressure, and labor costs were generally well contained.
Growth in economic activity in the district picked up to a moderate pace, and contacts expect growth to remain moderate over the next six to 12 months. Business spending and manufacturing production grew at a moderate rate. Hiring continued at a modest rate, and contacts said they expected it to strengthen to a moderate pace in the next six to 12 months. Contacts also indicated that competition was growing for lower-skilled workers. Wage pressures were steady overall, with greater pressure for high-skilled occupations than for low-skilled occupations. Nonwage labor costs were little changed. Staffing firms reported no change in billable hours and difficulty filling orders at the wages employers are willing to pay.
Economic conditions in the district improved slightly. Manufacturing activity has been mixed, while activity in the service sector has been positive. Contacts in manufacturing, construction, and wholesale trade continued to report difficulties in finding skilled or qualified candidates to fill job vacancies, either because of a shortage of applicants or because candidates lack the necessary skills. Employers continued to report modest hiring, although with ongoing difficulties finding qualified workers, and wage pressures remain strong. A majority of contacts reported that nominal wages were higher relative to the same time last year, and some reported employment was higher or slightly higher. Contacts expect similar trends to persist over the next quarter. Several firms that provide business support services, information technology services, and education services announced plans to build new facilities and hire new employees.
The district’s economy grew modestly overall since the previous report. Growth was noted in commercial real estate and professional services. Activity in energy and manufacturing was steady, but commercial construction slowed from high levels. Wage pressures were moderate. Employment grew moderately in spite of tight labor availability—separate call centers in Montana and South Dakota announced plans in late summer to hire new workers over the coming months. However, not all companies have been able to procure needed labor. Hours billed at a Minneapolis-St. Paul staffing firm fell from June through mid-August, which the owner said was “nearly 100% due to lack of available workers.”
Economic activity in the district was largely flat, although expectations remained mostly positive. District manufacturing firms reported modest declines in activity, but expectations for future activity remained positive. Professional and high-tech firms reported moderate increases in activity. Energy activity edged higher from low levels on expectations of higher prices, and the commercial real estate market strengthened slightly. Expectations for the commercial real estate market were for continued moderate expansion. Wages continued to grow modestly in most industries, with some labor shortages reported for selected skilled positions.
Economic activity in the district expanded slightly. Manufacturing activity was flat to up. Reports of employment changes were mixed, and prices held steady. Demand for nonfinancial services increased. Staffing services firms said demand picked up, particularly in Dallas, and a slight uptick was seen in Houston as well. Reports of hiring were scattered among service sector companies, with staffing firms adding employees and hiring continuing among leisure and hospitality firms. Several contacts noted a tight labor market for health care professionals, and labor constraints in the construction sector were ongoing. Outlooks were generally positive but cautious, with the upcoming presidential election driving some of the uncertainty.
Economic activity in the district continued to grow at a moderate pace. Overall price inflation remained limited, while upward wage pressures intensified. Manufacturing activity changed little—contacts reported that capacity utilization rates remained slightly low. Activity in the business services sector grew at a moderate pace. Shortages of raw materials and labor somewhat constrained growth in construction activity in some parts of the district. In the broader transportation sector, delivery volumes continued to grow at a brisk pace, particularly for ecommerce. Growing demand for highly skilled workers and technology specialists fueled strong wage growth in the technology, banking, and health care IT sectors. Shortages of physicians and nurses continued to push up wages in the health care industry. Increased demand and the implementation of minimum wage laws in some parts of the district increased wages for lower-skill workers.