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January 2019 Federal Reserve Board's Beige Book
DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on January 16, 2019. It "... was prepared at the Federal Reserve Bank of Chicago based on information collected on or before January 7, 2019. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials." The excepts were chosen for their relevancy to the recruitment, staffing, employment services, and IT services sectors. The inclusion or exclusion of any sections or wording, the inclusion of each District's service areas (note that sections of some states are divided and end up in more than Fed District), as well as emphasizing certain sections with special typefaces (e.g. bold-faced) was done solely at the discretion of steinbergemploymentresearch.com. The full report can be found at the Federal Reserve Board. The next Beige Book is expected to be released on March 6, 2019, at which time we will offer our next summation. If you want to receive notification when it is posted, please fill-in the form above.
First District -- Boston (CT, MA, ME, NH, RI & VT) return to District list Economic activity in the First District expanded at a modest to moderate pace since the last report, amid some signs of slowing growth. ... Most manufacturers cited increased revenue from a year ago, but some noted the pace of increase was slower recently than earlier in the year. Software and information technology services firms also reported moderate revenue and demand growth in the closing months of the year. ... While retailers (including an auto dealer) and manufacturers said sizable tariff increases would pose significant problems if they occurred and many respondents cited uncertainty, outlooks remained mostly positive. Employment and Wages Many contacts cited selected labor shortages and moderate increases in pay rates at the end of 2018. Retailers noted that their labor costs will continue to go up in 2019, in part because of state minimum wage increases and labor shortages in some markets. On balance, however, they said hiring in the retail sector has not been difficult. ... Manufacturing contacts did not report any significant changes in employment. Some cited difficulties finding workers, especially skilled engineers; however, one contact reported that after a "market adjustment" raised compensation by 10 percent to 15 percent, difficulties in hiring and retention dramatically eased. Software and IT services respondents reported annual wage and compensation increases of 2 percent to 4 percent, with no changes in average headcount or turnover rates. Manufacturing and Related Services Three-quarters of the manufacturing firms contacted this cycle reported higher sales year-on-year. One firm with lower sales, a chemical company, said that the year-earlier period was exceptionally strong. Another contact attributed the decline to slowing growth in the automotive industry around the world. Some contacts said growth slowed in the fourth quarter relative to earlier in the year. A diversified manufacturer said that customers were taking longer to pay bills. On the plus side, two contacts said that a shortage of trucking capacity that had been a problem in recent years appeared to have eased. Contacts did not report any major revisions to capital expenditure plans.... Software and Information Technology Services Software and IT services firms reported moderate growth as the fourth quarter drew to a close. The majority of contacts noted revenue growth in the mid-to-high single digits year-over-year, with corresponding positive growth in product demand as well, both quarter-over-quarter and year-over-year. Looking to 2019, all but one contact reported a desire to focus more on investing in sales and marketing. Overall, contacts expressed wariness about the uncertainty they have felt in markets, but noted no specific impacts on their individual firms to date.
Second District -- New York (CT, NJ & NY) return to District list Economic activity in the Second District has leveled off in the latest reporting period. Still, the labor market has remained tight, and wage growth has picked up slightly. ... Manufacturing activity leveled off, while business was down slightly in a number of service industries. ... Employment and Wages The labor market has remained tight across the District, with employers continuing to report difficulties in filling a wide variety of open positions. Businesses reported that employment was little changed, on balance, since the last report. Firms in manufacturing, wholesale trade, finance, and leisure & hospitality reported modest net hiring, while contacts in the transportation, health & education, and professional & business services sectors indicated that employment was flat to down modestly. Retailers noted little change in holiday-season hiring, relative to the prior year, though more staff was reportedly assigned to handling on-line orders. Wages have picked up somewhat, particularly in retail and leisure & hospitality. Employers indicated that they are budgeting for moderately larger wage increases in 2019 than they did for 2018. A number of business contacts in New York State, including a few manufacturers, expressed concern about the recent hike in New York's minimum wage. Manufacturing and Distribution The manufacturing and distribution sectors weakened noticeably in the latest reporting period. Manufacturers noted a sharp deceleration in business activity, while wholesale distributors and transportation firms reported outright declines. Looking to the months ahead, contacts in these sectors remained somewhat optimistic, on balance, though less so than in recent months. As in recent reports, a handful of contacts continued to express concern about tariffs and trade restrictions. Services Overall, business has been mixed but, on balance, softer in the latest reporting period. Contacts in the professional & business services, education & health, and information industries reported flat to declining activity at year end, though they remain cautiously optimistic about the near-term outlook. ...
Third District -- Philadelphia (DE, PA & NJ) return to District list On balance, aggregate business activity in the Third District maintained a modest pace of growth during the current Beige Book period, although slowing occurred among service sectors and some real estate activity declined. The labor market remains tight, which continued to constrain hiring at a modest pace and to apply moderate upward wage pressures. ... The growth outlook over the next six months remained positive, with half of the nonmanufacturing firms and over 40 percent of the manufacturers anticipating increases in general activity. Employment and Wages Employment growth continued at a modest pace during the current Beige Book period. The share of firms reporting an increase in staff generally ranged between 15 and 25 percent among broad sectors. The firms noted very little change in the average hours worked since the prior Beige Book period. Many contacts continued to note a tight labor market; however, builders said that construction activity had peaked or was peaking and that residential and commercial contractors were beginning to scramble for new projects to keep their workers employed. Staffing firms reported ongoing difficulty hiring and retaining workers, although one firm noted that orders had slowed a bit. On balance, wage growth continued at a moderate pace as firms typically cited increases for wages and benefits that averaged 3.0 to 3.5 percent. In one of the District's tightest labor markets, average wage rates were up 6.0 percent over the prior year. The share of nonmanufacturing contacts who reported increases in wage and benefit costs remained steady at just over one-third. One staffing firm noted that wage increases had slowed but that several clients would be evaluating starting wages in early 2019, so wage rate hikes were expected to pick back up in the first quarter. Manufacturing Manufacturing activity continued at a modest pace of growth--typical for the Third District. The percentage of firms that reported increased shipments fell somewhat, while the percentage reporting an increase in new orders edged up. The makers of paper products, primary metal products, and electronic equipment tended to note gains in new orders and shipments; the makers of lumber products, chemicals, fabricated metal products, and industrial equipment reported mixed results. Contacts often cited labor supply issues as a deterrent to growth, in addition to supply chain problems, rising commodity prices, and uncertainty surrounding tariffs. ... On balance, manufacturers continued to expect general activity to increase over the next six months. Expectations of future increases in new orders, shipments, employment, and capital spending remained nearly the same as the prior period and at high levels. Nonfinancial Services Service-sector firms reported a modest pace of growth -- a notable slowdown from the prior Beige Book period. The percentage of firms reporting increased sales fell by over 20 percentage points to about 35 percent, and reports of new orders dropped 10 points to about 25 percent. Meanwhile, reports of declining sales and fewer new orders increased. Despite widespread reports of a slowdown, one large firm noted that its customers remain current on their bills. Expectations of future growth remained relatively strong but did fall to half of firms from two-thirds in the prior period.
Fourth District -- Cleveland (KY, OH, PA & WV) return to District list Economic activity in the Fourth District increased slightly since our previous report, with firms across industries reporting mostly stable demand. District firms continued hiring at a moderate but slightly softer pace than in recent months. Contacts noted continuing wage pressures to attract and retain workers. Reported wage increases were moderate and in line with recent trends. ... Employment and Wages District firms added workers at a pace that was moderate but slightly softer than in the previous survey period. Most firms that reported increased hiring also noted improved customer demand, while firms that reported decreased hiring noted seasonal business declines as reasons behind their staffing decisions. Across various industries, several firms reported hiring for new positions because of business expansions. Contacts also reported hiring to replace departed workers. A steel producer noted difficulty finding hourly workers. Driver turnover remained a problem in the freight industry; however, one trucking contact reported some success hiring drivers. Reports of wage pressures were similar to those of the previous period, and firms across many industries offered increased incentives to retain workers and attract new talent. In addition to annual cost-of-living and merit increases, some construction contacts raised incentives for retention, and manufacturers increased base pay to attract skilled new hires. Manufacturing Manufacturing conditions softened at the end of the fourth quarter, but many contacts reported that this was largely a result of the usual seasonal slowdown. ... They also acknowledged that some of the strength in 2018 was driven by orders being pulled-ahead amid concern about future price increases, which have now come to pass or will be implemented in early 2019. The outlook for conditions in 2019 remains fair. Nonfinancial Services Activity in nonfinancial services increased at a modest pace. Professional and business services firms noted increased demand, especially in the information sector, in which firms reported regular year-end increases in purchases of software and digital technologies. ...
Fifth District -- Richmond (MD, NC, SC, VA & WV) return to District list Since our previous Beige Book report, the Fifth District economy expanded at a modest rate. One exception was the manufacturing sector where many firms reported a decline in shipments and new orders and continued to report high input costs due to tariffs. ... The demand for labor increased moderately while wage growth remained modest. ... Employment and Wages On balance, the demand for labor increased modestly in recent weeks, but firms indicated that hiring remained constrained by the tight labor market. Some of the most hard-to-fill positions were electricians, hotel and restaurant workers, construction workers and managers, computer engineers, and cyber professionals. Meanwhile, a staffing agency reported a decrease in demand for temporary staffing services as more clients were hiring full-time workers instead. Wage growth remained modest, overall; however, a few contacts reported sharp increases in starting wages for particular positions. Manufacturing A large share of the Fifth District manufacturers surveyed reported a decline in shipments and new orders in recent weeks. Some firms attributed the decrease to slowing global demand, adverse weather conditions, and/or seasonal factors. Meanwhile, rising raw materials costs were widely reported with some price increases being attributed to tariffs. A Maryland can manufacturer looked for ways to increase automation to reduce the number of employees in order to help offset the rising cost of raw materials. A Virginia display case manufacturer had Chinese goods shipped through west coast ports in order to get goods to the country ahead of an anticipated tariff increase. Meanwhile, a West Virginia steel company increased capital expenditures as they experienced strong business. Non-Financial Services Since our previous Beige Book, nonfinancial services demand increased modestly, overall. The most positive reports came from firms in the tech sector. A software development firm and an IT consulting business reported strong growth. Also, a Fifth District university reported an increase in interest in computer science and IT related majors. Meanwhile, an accounting firm experienced solid growth and expected continued growth in 2019.
Sixth District -- Atlanta (AL, FL, GA, LA, MS & TN) return to District list Sixth District business contacts remained largely positive with a majority noting that economic activity grew at a moderate pace over the reporting period. Most contacts expect steady growth in the near-term; however, several contacts cited increased levels of uncertainty going into 2019, to include concerns over politics and trade. As labor markets remained tight, many firms noted increasing retention efforts. On balance, wages increased since the previous report, with pressure growing particularly among low-skill, hourly positions. ... Manufacturers indicated that new orders and production levels decreased since the previous report. ... Employment and Wages Similar to previous reports, business contacts remained focused on employee retention. District employers continued to expand wage and non-wage compensation offerings to retain workers. In spite of these efforts, firms expressed concern about their ability to meet growing demand with existing staffing levels. A few contacts from construction, manufacturing, and health services mentioned they were actively overstaffing certain positions where possible, or were holding on to workers even as demand eased in an effort to position themselves for future growth. Business contacts also mentioned that efforts to build culture and loyalty remained important to retention. Average wage increases were typically reported around 3 percent across the District, a level that most firms intend to maintain in 2019. Broadly, businesses continued to report notable wage pressure among low-skill, hourly jobs, particularly in hospitality and retail. A number of business contacts noted that announcements by large national companies to raise their minimum wage intensified pressure among similar jobs. Challenges with escalating wage pressure were especially acute among small businesses, which reported struggles to compete with large- and medium-sized firms' ability to increase wages. Manufacturing Reports from manufacturing contacts indicated that business conditions softened slightly since the previous report. New orders and production levels decreased, and purchasing managers reported shorter wait times for supply deliveries. ...
Seventh District -- Chicago (IA, IL, IN, MI & WI) return to District list Economic activity in the Seventh District grew at a modest pace in late November and December, and contacts expected growth to continue at that pace over the next 6 to 12 months. Employment, consumer spending, and business spending increased modestly; manufacturing increased slightly; and construction and real estate activity was little changed. Wages and prices rose modestly and financial conditions deteriorated slightly. ... Employment and Wages Employment growth continued at a modest pace over the reporting period and contacts expected job gains to continue at that rate over the next 6 to 12 months. Hiring was focused on production and professional and technical workers, while there was a decline in the number of contacts planning to hire sales workers. As they have for some time, contacts indicated that the labor market was tight and that they had difficulty filling positions at all skill levels. A staffing firm that primarily supplies manufacturers with production workers reported continued difficulty in filling orders and no change in billable hours. Wage growth remained modest overall. Contacts were most likely to report wage increases for managerial, professional and technical, and administrative workers. Multiple manufacturing contacts reported that rising wages for entry-level positions was leading them to invest in automation that would increase these workers' productivity and justify the higher wages. Many firms reported growing benefits costs. Business Spending Business spending increased modestly in late November and December. ... Most manufacturing contacts also reported that stocks were at comfortable levels, though steel service center inventories remained below historical norms and one steel consumer reported cutting back their own production because of steel input shortages. ... Outlays were primarily for replacing industrial and IT equipment and for renovating structures. ... Manufacturing Growth in manufacturing production slowed in late November and December, with contacts reporting only a slight increase in output. That said, most contacts were pleased with the level of production. ...
Eighth District -- St. Louis (AR, KY, IL, IN, MO, MS & TN) return to District list Reports from contacts indicate that economic conditions have slightly improved since our previous report. Firms continued to report difficulties finding qualified workers. Overall, wage pressures have increased moderately, with contacts citing minimum wage increases as a contributing factor. ... Activity in the manufacturing sector has increased in recent months, although at a slower rate than noted in the previous report. ... Employment and Wages Employment has grown slightly since the previous report. Contacts in Arkansas and Missouri reported slight growth in manufacturing employment, and small business employment increased modestly. Information technology firms in the St. Louis area reported plans to increase hiring in early 2019. Contacts throughout the District continued to cite difficulties finding qualified employees. The labor market was particularly tight for technical jobs, with some firms lowering education requirements to attract more candidates. Schools and firms also continued to develop training programs to alleviate shortages in skilled trades. Wages have increased moderately since the previous report. Pay raises were especially strong for entry-level positions. Contacts in information technology and manufacturing reported that labor market tightness led to increases in starting wages. Furthermore, minimum wage increases in healthcare and the public sector were either announced or took effect throughout the District. Small business wages in Missouri and Tennessee grew moderately. Manufacturing Manufacturing activity has increased at a moderate pace since our previous report. Survey-based indexes showed that Arkansas and Missouri manufacturing activity continued to expand from November to December, but the pace of growth slowed. New orders and production also increased in both states, but at a slower pace than in the previous report. Several contacts expressed an optimistic outlook for the next quarter, including manufacturers of commercial vehicle parts and primary metals. ... On the other hand, several manufacturers noted increases in wages leading to higher costs and higher turnover rates, making it difficult for them to recruit engineers and staff. Nonfinancial Services Activity in the nonfinancial services sector has been unchanged since the previous report. The number of vacancies for nonfinancial services occupations in December has decreased over the previous month. This can be attributed to a slowdown following the holiday rush; however, year-to-year vacancies are also down. The transportation industry continues to experience growth. Major logistics firms continue to make investments in distribution centers across the District. ...
Ninth District -- Minneapolis (MI, MN, MT, ND, SD & WI) return to District list The Ninth District economy grew modestly overall since the last report. Employment grew moderately, though lack of available labor continued to hamper overall hiring. Wage pressures were moderate, while price pressures were modest. The District economy showed growth in consumer spending, manufacturing, commercial real estate, and mining. However, construction and residential real estate were mixed, energy slowed, and agriculture remained weak. Employment and Wages Employment grew moderately since the last report, though lack of available labor continued to hamper overall hiring. Demand for labor across the District has ebbed slightly but remained healthy overall. November job postings fell slightly in Minnesota, South Dakota and Michigan's Upper Peninsula compared with a year earlier, in contrast with double-digit increases in Montana and North Dakota. Among more than a dozen staffing firm contacts, mostly in Minneapolis-St. Paul, a small majority said job orders and total clients were higher in the fourth quarter compared with a year earlier. But tight labor supply was limiting job placements and hours booked among staffing firms, with unfilled job orders seeing a notable increase. Surveys by the Minneapolis Fed in late November and December identified labor availability as the biggest obstacle to short-term growth. In a separate, external survey of Minnesota builders, almost two-thirds said the lack of available labor has forced them to turn down business. A Montana retailer noted that "every business is hiring and the hiring pool is shallow." Very little relief in labor supply was expected. Numerous metro areas were at or near record-low unemployment; unemployment insurance claims over the most recent six-week period (through mid-December) dropped more than 4 percent across District states, and continuing claims dropped by 10 percent. Wage pressures rose moderately. Recent surveys by the Minneapolis Fed found widespread wage increases that coalesced a little below 3 percent. One survey found more persistent wage increases for new employees and specific positions, rather than company-wide raises. Staffing firm contacts noted continued reluctance among some clients to raise wages enough to change hiring difficulties. "Clients are not changing with the labor market, so wages are not going up as much as they should," said a contact in Minneapolis-St. Paul. A central Minnesota contact said that "skilled trades are hard to find and wages are not increasing (enough) to bring in good candidates that have the necessary skills and background." Most surveys showed that expectations for future wage hikes were slightly below 3 percent. One modest exception was the Minneapolis Fed's annual manufacturing survey (conducted in partnership with the Minnesota Department of Employment and Economic Development). Respondents to this survey expected wages to increase by 3 percent to 5 percent in 2019. Manufacturing District manufacturing activity increased moderately since the previous report. Respondents to the Minneapolis Fed's annual manufacturing survey indicated growth in orders, production, employment, capital investment, and productivity over the past year, with expectations for further growth in 2019. An index of manufacturing conditions produced by Creighton University indicated increased activity in December in Minnesota and the Dakotas. A producer of electrical transmission equipment broke ground on a large new plant in South Dakota.
Tenth District -- Kansas City (CO, NM, MO, NE, OK & WY) return to District list Tenth District economic activity was roughly flat in December and early January, as growth in several sectors was offset by a slowdown in others. ... Manufacturing activity edged up since the last survey period, and contacts expected modest increases in capital spending in the coming months. ... Employment and employee hours rose across most industries in the District, and additional gains were anticipated in the months ahead. Wages expanded at a modest pace and were expected to grow at a similar pace moving forward. District prices rose further, and gains in input prices continued to slightly outpace those of selling prices. Employment and Wages Employment across the District rose modestly in December and early January, and employee hours edged up. Employment and employee hours were expected to pickup modestly in the months ahead. Respondents in the retail trade, wholesale trade, transportation, professional services, real estate, health services, restaurant, and manufacturing sectors noted rising employment and employee hours, while contacts in the auto sales and tourism sectors reported a decline. ... A majority of respondents continued to report labor shortages for low- and medium-skill workers, including positions for retail sales, mechanics, technicians, truck drivers, restaurant staff, and specialized IT workers. ... Wages were expected to continue their current pace of growth in the months ahead. Manufacturing and Other Business Activity Manufacturing activity edged up compared to the previous survey period, and other business contacts noted mixed sales growth. Although factory activity continued to expand, the pace of growth slowed at both durable and nondurable goods plants due primarily to decreases in metals, electronics, and petroleum/coal products. ...
Eleventh District -- Dallas (LA, NM & TX) return to District list Expansion in the Eleventh District economy slowed to a more modest pace over the reporting period. While the level of activity generally remained healthy, growth decelerated broadly across the manufacturing, services, retail, and energy sectors. ... Employment expanded, albeit at a slightly slower pace, despite continued widespread labor shortages. Wage growth remained elevated, while price growth abated to more normal levels. Outlooks were notably less optimistic than in the previous report due to declining oil prices, political and trade uncertainty, higher interest rates, and stock market volatility. Employment and Wages Employment growth continued but slowed slightly over the reporting period, and labor market tightness persisted. Contacts continued to note a lack of available workers, both high skilled and low skilled, with specific mentions of shortages in construction, energy, hospitality, health care, banking, and transportation (truck drivers specifically). Wage growth had been on the rise for most of 2018 but eased toward yearend in several sectors, while still remaining elevated. Numerous contacts said workers were expecting higher pay, and many raised wages by 3-10 percent in response. One contact implemented a higher minimum wage to reduce employee turnover and attract higher-quality applicants. Firms responding to special questions on wages reported 4.5 percent annual wage growth in 2018, on average, with expectations of growth slowing to 4.0 percent in 2019. Manufacturing Over the reporting period, output growth continued to abate slightly for both durables and nondurables manufacturing. The Texas manufacturing sector ended 2018 with modest growth, a downshift from the more robust expansion seen earlier in the year. Lower fuel prices boosted demand among petroleum refineries. Outlooks among manufacturers turned slightly negative in December. Contacts pointed to declining oil prices, labor constraints, political uncertainty, higher interest rates, and reduced activity in the housing and energy sectors as factors restraining growth or damping outlooks. Nonfinancial Services Growth in the nonfinancial services sector slowed notably over the reporting period. The slowing was led by staffing services, where demand decelerated from very high levels and revenue declined for some firms. A few staffing contacts reported increased uncertainty and customers delaying hiring plans. ... Leisure and hospitality was a bright spot, with solid revenue growth through yearend, and growth among professional, scientific, and technical services firms remained fairly stable. ...
Twelfth District -- San Francisco (AK, AZ, CA, HI, ID, NV, OR, UT, & WA) return to District list Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of mid-November through December. Conditions in the labor market remained tight, and wage growth was moderate. ... Conditions in the manufacturing sector strengthened modestly, and conditions in agriculture deteriorated slightly. ... Employment and Wages Conditions in the labor market remained tight. Contacts reported that worker shortages persisted across industries and skill levels. Nonetheless, several contacts reported an uptick in the pace of hiring. A major shipping and logistics business in Northern California hired more seasonal workers than usual in response to strong holiday demand. In the restaurant industry, a contact in the Pacific Northwest observed rising employment levels, while contacts in the Mountain West and Southern California noted intense worker shortages that led one chain to cancel plans to open additional locations. ... Wage growth continued to increase moderately. Contacts across the District observed intense compensation pressures for more highly skilled workers. Employers with vacancies in the information technology, cybersecurity, and management fields continued to boost starting salaries to attract qualified candidates. Wages for lower-skilled workers also rose moderately, due to brisk competition and, in some cases, in reaction to imminent minimum wage increases in the new year. A Southern California contact in the business services sector reported that training costs also increased as positions turned over more frequently given the tight job market. Manufacturing Conditions in the manufacturing sector strengthened modestly overall. Contacts in Northern California reported that activity in the semiconductor industry was solid, but they noted the potential for stock market turbulence to modestly limit new orders. ... |
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© 2017, Bruce Steinberg. All rights reserved. |
last updated January 16, 2019 |
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