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July 2018 Federal Reserve Board's Beige Book
DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on July 18, 2018. It "... was prepared at the Federal Reserve Bank of Boston based on information collected on or before July 9, 2018. 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 September 12, 2018, 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 First District economic activity continued to expand at a moderate pace, with nearly all responding retailers, manufacturers, hospitality providers, and software and IT firms citing year-over-year increases in sales and revenues in recent weeks. ... Contacts across a range of industries said trucking capacity continued to be a major issue. Overall, the outlook continued to be positive. Contacts expressed concerns about tariffs but none cited trade issues as affecting demand or hiring and capital expenditure plans. Employment and Wages Many responding firms have done some hiring; most reported tight labor markets and modest increases in pay. Retail contacts reported that labor supply was tight and one contact said labor costs were up 10 percent over the previous year. All surveyed manufacturers were hiring or maintaining current levels of employment. Manufacturing contacts said the labor market was tight, but the exceptional difficulties were mostly in highly skilled areas like engineering. Labor shortages continued to be an issue in the hospitality industry, particularly in seasonal destinations like Cape Cod. Contacts in the software and information technology areas expressed concerns about restrictive immigration policies. Manufacturing and Related Services Of nine firms we contacted this cycle, all but one reported higher sales. The one exception was a toy manufacturer and our contact said that the weakness was expected and attributable to the closure of a major toy retailer. While several contacts expressed concern about the effect of the trade war on sales, none reported any sales declines as a result. Four of our contacts said that costs were rising faster than sales revenue. Rising costs were attributed to raw material prices and a lack of trucking capacity. One contact in the container industry said that they had planned to increase output and hire additional workers but had not because of delays in the delivery of new capital equipment.
Software and Information Technology
Services Second District -- New York (CT, NJ & NY) return to District list Economic activity in the Second District has continued to expand at a moderate pace since the last report. The labor market has remained tight, while wage growth has mostly stayed steady. Input price increases have remained fairly widespread, and consumer price inflation continued to run a bit higher than earlier this year. Activity in the manufacturing and distribution industries grew at a fairly brisk pace, while growth in most service industries has been more subdued. ... Employment and Wages The labor market has remained tight across the District. Businesses reported particular trouble filling senior positions and finding technically skilled workers, especially in IT. One business contact observed that almost all job-seekers are already employed. A New York City employment agency noted that clients have had difficulty adjusting to a city law prohibiting prospective employers from asking about salary history or using it as a guide to compensating new hires. Hiring activity has been steady overall but mixed by industry. Business contacts in manufacturing, wholesale, retail, and finance reported a pickup in hiring activity, while those engaged in information and professional & business services noted some pullback in hiring. Contacts in the transportation industry noted further shrinkage in their workforce. Separately, a payroll service firm observed that job growth at small businesses has slowed somewhat recently. A major utility firm remarked that devoting more resources to vocational training and building relationships with local high schools and colleges, has made it easier for them to fill job openings. Wage growth has generally remained steady overall but somewhat more brisk than last year. Wages were reported to be flat in the education & health and transportation sectors but rising in other sectors. The most widespread gains were reported in retail & wholesale trade and leisure & hospitality. Manufacturing and Distribution Both manufacturers and wholesale distributors indicated that activity continued to expand at a brisk pace since the last report. Transportation firms reported more subdued growth. Regarding the near-term business outlook, contacts in the wholesale and transportation sectors continued to express widespread optimism. Manufacturers remained optimistic, on balance, but have become less so than earlier in the year. A number of manufacturing contacts remarked that tariffs have raised their costs. Moreover, uncertainty about future trade policy was cited as a major concern, particularly in parts of upstate New York, where there is substantial trade with Canada. Services Service-sector firms continued to report minimal to modest growth in activity. Contacts in professional & business services, education & health, and leisure & hospitality indicated modest growth, while those in the information industry continued to report flat activity. Looking ahead, leisure & hospitality businesses remained glum about near-term prospects, but contacts in the other service industries expressed fairly broad optimism. ... Third District -- Philadelphia (DE, PA & NJ) return to District list Aggregate business activity in the Third District continued at a modest pace of growth during the current Beige Book period. Employment also continued at a modest pace; but with hiring constrained by a tightening labor market, wage increases have become more widespread and accelerated to a moderate pace. Despite rising labor costs, most contacts are not yet concerned that inflation will exceed its current modest pace. While manufacturing activity and nonfinancial services maintained a moderate pace of growth, most retail sectors continued at a modest pace, at best. ... Employment and Wages Employment continued to grow at a modest pace during the current Beige Book period. Manufacturing and nonmanufacturing firms reported ongoing net additions to staff; moreover, hiring has broadened among nonmanufacturers since last period. Average hours worked rose over the period for manufacturing firms and nonmanufacturers. Staffing firms reported ongoing demand for workers, but a scarcity of candidates, plus difficulty hiring and retaining employees. As the job market tightens, wages have risen, and employers have converted more full-time temporary workers to permanent employees than is normal. However, according to one contact, many temp orders continued to be for part-time work. On balance, wage growth appears to have accelerated to a moderate pace and was more widespread. Over half of the nonmanufacturing contacts reported increases in wage and benefit costs. Several banking contacts also noted rising wages, especially for lower-wage jobs. Manufacturing Manufacturing activity maintained a moderate pace of growth. About 40 percent of the firms reported an increase in shipments and new orders; however, this percentage was closer to 50 percent for new orders during the prior period. The makers of chemical products, paper products, fabricated metal products, and electronic equipment tended to note gains in new orders and shipments; the makers of lumber products, primary metals, and industrial machinery reported mixed results. One machinery manufacturer noted that the effects of the steel tariffs have been chaotic to its supply chain--disrupting planned orders, increasing prices, and prompting some panic buying. On balance, manufacturing contacts continued to expect general activity to increase over the next six months; the percentage of firms expecting future increases remained just below 50 percent. About 40 percent of the firms expected increases in future employment and future capital expenditures, which represented an improved outlook for capital expenditures since the prior period, but a lower expectation for employment. Nonfinancial Services On balance, service-sector firms continued to report moderate growth in general activity. Nearly half of the firms contacted reported increases in sales and new orders. One large firm reported that growth has been better than it was in 2017--which had been stagnant--and the firm continues to see no problems with payment collections from its clients. Expectations of future growth became more widespread, with over two-thirds of the firms anticipating increased activity. Fourth District -- Cleveland (KY, OH, PA & WV) return to District list Business activity in the Fourth District grew moderately during the survey period. Demand was strong in many sectors, but hiring continued at about the same pace as in the previous survey period as a dearth of qualified workers constrained hiring. Wages rose moderately, and increases were in line with recent trends. Upward pressure on input costs was strong, notably for fuel and metals. Contacts widely attributed the cost increases to import tariffs. However, final selling prices rose only moderately. Firms raised their prices to cover, at least partially, their increased raw materials and transportation costs. Otherwise, businesses were cautious about raising their selling prices. ... Employment and Wages District businesses added workers at a pace that was moderate and similar to that of the previous survey period. Most firms reported strong customer demand and optimism about the economy's near-term prospects as supporting their hiring decisions. Very few firms reduced headcount, and a sizable share reported creating new positions. Hiring was strongest among construction firms thanks to high project volumes. Also, strong demand for technology services enabled professional services to add workers at a healthy clip. Contacts reported the dearth of qualified workers constrained hiring across an array of occupations. The problem was most often highlighted by manufacturing, construction, and transportation companies. One steel contact noted the company had significantly increased overtime hours to cope with the worker challenge. ... Despite tightness in the overall job market, wage pressures remained consistent with recent trends in the District. In general, employers raised wages moderately as part of cost-of-living increases or annual merit raises or to fulfill union contracts. Manufacturing The strong manufacturing demand seen earlier in the year showed no signs of letting up in the current survey period. Contacts mostly attributed the momentum to strong US economic growth that broadly supported demand in end markets. One pump and motor manufacturer noted increased demand from customers in primary metals manufacturing and extractive industries. An industrial metals producer cited strong demand from the construction sector. Some manufacturers noted that capacity utilization had risen to meet demand and that a few contacts mentioned they struggled to keep up with orders. Contacts remarked that concerns about future trade- and inflation-related price increases had prompted some customers to accelerate purchases. Most manufacturers expected that continued economic growth would lead to stronger customer demand in the near term. However, one auto-related manufacturer expected import tariffs to lead to weaker sales because of the consequent increase in prices. Nonfinancial Services Nonfinancial services firms reported strong demand thanks to generally favorable economic conditions. Business advisory firms and software developers reported strong activity. In addition to tax savings and ongoing strong confidence, contacts remarked that their services were in demand because businesses were modernizing their IT infrastructures and attempting to understand the implications of worker scarcities. ... Fifth District -- Richmond (MD, NC, SC, VA & WV) return to District list Since the previous Beige Book, the Fifth District economy has continued to expand at a moderate pace. Manufacturing activity remained strong although firms reported rising input prices and shipping delays. Trucking firms experienced robust growth and struggled to find drivers and keep up with demand. The volume of goods moving through District ports remained high. Travel and tourism were strong in recent weeks; however, some businesses were unable to provide services due to labor shortages. Retail and auto sales strengthened but firms continued to report concerns over increasing shipping delays and costs. ... Hiring increased at a moderate rate as the job market remained tight. ... Employment and Wages Labor demand strengthened moderately in recent weeks, and employment agencies reported growth in new job openings across all the industry segments they service. Employers continued to report tight labor markets, while candidates increasingly receive multiple jobs offers. Firms reported difficulty filling positions for mechanics, construction workers, engineers, commercial lenders, treasury and risk managers, accountants, IT personnel, hospitality workers, and skilled trade positions. While wage increases remained modest across sectors, reports suggested that wage pressures increased further. Manufacturing Manufacturing remained fairly strong. However, several manufacturers reported that while sales increased, profits dipped as price increases could not offset the rising costs of materials and transportation. Manufacturers also expressed concern about the potential adverse effects of rising trade tensions. For example, a District foam manufacturer reported growth in business but growing costs of raw materials resulting from tariffs. Additionally, a Maryland can manufacturer said he could not get the quality of steel needed domestically and anticipated losing business to foreign competitors who are not faced with steel tariffs. Non-Financial Services Since our previous report, the demand for nonfinancial services increased moderately, on balance. Specifically, demand picked up for telecommunication, administrative and support, technology, education, health, and legal services. ... Sixth District -- Atlanta (AL, FL, GA, LA, MS & TN) return to District list On balance, reports from Sixth District business contacts indicated that economic activity continued to expand at a modest pace from mid-May through June. Although a number of contacts' sentiment declined due to uncertainty related to the impact of tariffs and tariff rhetoric, the overall outlook among businesses remains positive as most expect an increase in activity for the second half of the year. District firms continued to report difficulties filling positions with quality labor. On balance, wage growth remained steady. ... Manufacturers reported growth in new orders and increasing production levels. Employment and Wages Broadly, business contacts across the District cited low availability of quality labor as a growing challenge. Contacts noted that this was a problem often not solved by increasing pay but by focusing on developing and training internal staff. Although firms in particular geographies struggled to fill certain positions, overall, most continued to add to headcounts. Some contacts cited persistent challenges with turnover; as a result, they were increasingly investing resources in retention efforts. The intensity of wage adjustments remained mixed across the region. On average, three percent annual increases were the norm; however, a growing number of firms noted that when they were not able to meet demand with existing staff, wage increases were around five to ten percent (or greater) as an effort to attract and retain workers. Business contacts continued to report using benefits, bonuses, incentives, and other forms of compensation that are temporary or can be withdrawn if necessary. Manufacturing The majority of District manufacturing contacts described overall business activity as solid during the reporting period. Firms indicated that growth in new orders was strong and that production levels were increasing. Purchasing managers reported that supply delivery times were getting notably longer and finished inventory levels were rising. Relative to the previous reporting period, expectations for future production were less upbeat, with about one-third of contacts expecting higher production over the next six months. Seventh District -- Chicago (IA, IL, IN, MI & WI) return to District list Growth in economic activity in the Seventh District slowed to a modest pace in late May and June, though contacts expected it to pick up to a moderate pace over the next 6 to 12 months. Manufacturing production increased moderately, while employment, consumer spending, business spending, and construction and real estate activity grew modestly. Wages and prices increased modestly, and financial conditions improved modestly. ... Employment and Wages Employment growth slowed to a modest pace over the reporting period, and contacts expected gains to continue at that rate over the next 6 to 12 months. Hiring was focused on production and professional and technical workers, though there was also an increase in the number of firms seeking to hire sales workers. As they have for some time, contacts indicated that the labor market was tight and reported difficulties filling positions at all skill levels. Manufacturers continued to report that they had delayed or turned down projects because of difficulties in finding workers. A staffing firm that primarily supplies manufacturers with production workers reported no change in billable hours. Wage growth remained modest overall, with wage increases most likely to be reported for managerial, professional and technical, and production workers. Most firms reported rising benefits costs.
Business Spending Manufacturing Manufacturing production increased at a moderate rate in late May and June. A number of contacts across manufacturing sectors reported operating at or near capacity. Steel production increased moderately in response to steady end-user demand and declining imports. One contact said that demand for domestic steel was the strongest it had been in 20 years. Demand for heavy machinery and heavy trucks continued to grow at a solid pace. Order books for specialty metals manufacturers increased modestly, helped by strong demand from the oil and gas sector. Manufacturers of construction materials continued to report slow but steady increases in shipments, in line with the pace of improvement in construction. Auto production increased modestly and remained at a solid level. Eighth District -- St. Louis (AR, KY, IL, IN, MO, MS & TN) return to District list Economic conditions in the District have improved slightly since our previous report. Firms reported modest increases in employment despite continued difficulties finding workers. Wages continued to increase modestly. ... Employment and Wages Employment has increased modestly since the previous report. Several manufacturing companies, including multiple steel producers, announced plans to expand and hire new employees. Furthermore, survey-based employment indexes indicated modest increases in June manufacturing employment across Missouri and Arkansas. To attract and retain employees, firms reported lowering hiring standards, offering more-generous non-wage benefits, and establishing training programs through partnerships with local schools and non-profit organizations. Contacts noted difficulties filling construction and trucking positions in particular. Wages have increased modestly since the previous report. Contacts reported that the continued tight labor market has led to increased wages in the services sector, particularly for entry-level positions. Retail and food-service firms reported having to raise wages of existing employees to match the higher rates for new employees. One trucking company offered the largest one-time pay increase in its history. Wages paid by small business in the St. Louis metro area grew slightly. ManufacturingManufacturing activity has increased at a moderate pace since our previous report. Overall manufacturing activity was stronger than one month earlier in both Arkansas and Missouri, and the pace of expansion increased in each. New orders and production also rose in both states. Several companies that manufacture motor vehicles and motor vehicle parts reported plans to expand facilities and increase production. Contacts in the paper packaging manufacturing industry reported running at nearly full capacity. Similarly, contacts in the recycled metal industry noted record volumes, and contacts in the mining equipment manufacturing industry reported experiencing backlogs. On the other hand, a manufacturer of plastic products for appliances indicated that sales were down. Several manufacturers noted increases in input prices, which they linked to tariffs. Nonfinancial Services Activity in the service sector has improved slightly since the previous report. The number of posted vacancies for nonfinancial services occupations in May was generally unchanged in Louisville and Memphis relative to the prior month and increased moderately in St. Louis. ... Contacts noted that a continuing shortage of commercial truck drivers has led to higher demand for railroad shipping. Ninth District -- Minneapolis (MI, MN, MT, ND, SD & WI) return to District list The Ninth District economy grew moderately overall since the last report. Employment grew modestly, with robust hiring demand continuing to be restrained by tight labor supply. Wage and price pressures were moderate since the previous report. The District economy showed growth in manufacturing, residential construction, commercial real estate, energy, and tourism. But consumer spending and commercial construction were mixed, residential real estate slowed, and agriculture remained weak. Employment and Wages Employment grew modestly since the last report. Hiring demand remained robust, but continued to be restrained by tight labor supply. May job openings in North Dakota and the Upper Peninsula of Michigan were both notably higher than a year earlier. A jobs database for Minneapolis-St. Paul showed that new postings for the second quarter were up significantly over the same period last year. An ad hoc poll of large firms in Minnesota found that roughly half were currently hiring to add to head count and expected that to continue over the coming year. A May survey of manufacturing firms showed strong hiring sentiment among respondents in Minnesota and the Dakotas. However, tight labor restricted firms' ability to find workers. May unemployment rates dropped across the District compared with the previous month and a year ago. District states saw a 13 percent decrease in initial unemployment claims during the most recent six-week period (though mid-June) compared with the same period last year. Continuing claims also dropped slightly. State workforce development offices widely reported relatively stable or higher job postings, but fewer job seekers. In Montana, May job postings with the state rose by 2 percent over a year earlier, while active job seekers fell by 21 percent. A Montana staffing firm reported that "hiring demand and job orders are up, but [worker] candidates are down." Wage pressure was moderate overall, though recent union contracts reflected larger increases. ...Services Activity in the professional services industry increased moderately since the last report. Respondents to the Minneapolis Fed's annual services survey indicated growth in sales, profits, productivity, and employment over the past year, with expectations for more growth in the coming 12 months. In contrast, several architecture contacts said business had decreased recently. Manufacturing District manufacturing activity increased briskly. An index of manufacturing conditions indicated increased activity in June compared with a month earlier in Minnesota and the Dakotas. Contacts from across the manufacturing sector reported very strong activity so far this year. A dealer of stamping and metal forming machinery said that the market for capital equipment was as busy as they'd ever seen. Producers of hydraulic equipment reported similarly strong demand, with some seeing double-digit growth this year. Tenth District -- Kansas City (CO, NM, MO, NE, OK & WY) return to District list Economic activity in the Tenth District continued to increase at a moderate pace in late May and June, and expectations were for additional gains in the coming months. Consumer spending and business services activity rose modestly compared to the previous survey period, and residential and commercial real estate activity climbed moderately higher. Manufacturing activity continued to expand at a robust pace, and manufacturers and business services contacts anticipated stronger capital spending in the months ahead. ... Employment increased modestly since the previous survey period, and a large share of contacts reported labor shortages. Wages, input prices, and selling prices moved moderately higher, and most contacts expected additional increases moving forward. Employment and Wages District employment and employee hours continued to increase at a modest pace in late May and June, and additional gains were anticipated in the months ahead. ... A high percentage of contacts in the District reported labor shortages for some skillsets, especially within the manufacturing sector. In particular, contacts noted difficulty finding retail sales staff, skilled IT workers, commercial drivers, and restaurant workers. Wages increased moderately in most sectors, and firms expected a similar pace of growth in the months ahead. Manufacturing and Other Business Activity Manufacturing activity continued to expand robustly, and the majority of other business contacts reported modest sales increases. Factory activity grew at both durable and nondurable goods plants, especially for computer, electronics, and food products. Production, shipments, and new orders increased moderately, and activity remained higher than a year ago. Manufacturers' capital spending plans grew moderately, and manufacturers expressed strong optimism about future levels of activity. Outside of manufacturing, firms in the professional, high-tech, wholesale trade, and transportation sectors reported modest sales growth, and expectations were for a faster pace of growth in the months ahead. Transportation contacts anticipated a modest increase in capital spending in the coming months, while professional, high-tech, and wholesale trade firms expressed more robust plans for capital expenditures. Eleventh District -- Dallas (LA, NM & TX) return to District list Expansion in the Eleventh District economy continued at a solid pace. Manufacturing output increased, and loan demand and retail spending rose. Broad-based expansion in the energy and service sectors continued. ...Hiring remained strong, and widespread labor shortages continued putting pressure on wages. Price pressures stayed elevated largely due to increases in input costs, particularly steel and aluminum. Although outlooks remained fairly optimistic, tariffs and trade-related concerns were creating uncertainty. Employment and Wages Job growth was solid and widespread across sectors, with most firms bullish in their expectations for long-run employment. Labor market tightness continued across a wide array of industries and skill sets, with several contacts saying difficulty finding workers was constraining growth to some extent. Oilfield services firms noted shortages of mechanics and truck drivers, and one contact said hiring and retaining workers in the bottom 20 percent of their payroll was a challenge. A staffing firm said they had partnered with a manufacturing company, where workers could attend a paid, six-week welding course and receive fulltime employment following successful completion. Nearly half of the firms responding to a set of special questions indicated that new technologies were not impacting employment levels, although 25 percent said it was changing the types of workers needed. Wage pressures remained elevated, and firms expected to give employees a larger increase in wages this year compared with 2017. Several firms were employing multiple strategies to recruit and retain employees, such as intensifying recruiting, raising wages, offering on-the-job training and/or increasing variable pay/bonus. Manufacturing Expansion in the manufacturing sector continued, although the overall pace of growth eased in June from the highs seen in May. Output growth was led by transportation equipment and food manufacturing. Growth in machinery production receded in June from May's elevated rates, while demand for fabricated and primary metals increased. Chemical production expanded further, and the Gulf Coast refinery utilization rate climbed up to 97.6 percent toward the end of June. Refiners and chemical producers reported optimistic outlooks, buoyed by relatively low domestic feed costs and expectations of healthy global demand for their products. Overall, outlooks among manufacturers remained positive, although contacts said that the new tariffs had heightened uncertainty in expectations for activity and prices. Nonfinancial Services Growth in nonfinancial services activity was broad based across industries. Strong revenue growth among transportation services and finance and insurance firms boosted service sector activity. ... Revenue growth in the professional and business services sector was solid, with staffing services firms noting persistently high demand, driven by widespread increases in activity across geographies and sectors. Expectations regarding future business conditions remained optimistic, although higher fuel prices, rising costs, labor shortages, and uncertainty surrounding trade policies were sources of concern among contacts.
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-May through June. Conditions in the labor market remained tight, and wage pressures picked up. Price inflation increased moderately. Sales of retail goods picked up slightly, while activity in consumer and business services edged down. Activity in the manufacturing sector remained solid, and conditions in the agriculture sector deteriorated modestly. ... Employment and Wages Tight labor market conditions persisted across all sectors, leading to a pickup in wage growth. Contacts continued to report challenges retaining workers. In the Mountain West, a few major national employers attracted low-skilled warehouse workers from smaller businesses that could not match their starting wages. Across the District, contacts observed higher starting salaries and increased bonuses to attract skilled financial service and information technology professionals. Demand for skilled lending officers increased moderately due to stronger loan growth over the reporting period. Shortages of plumbers, electricians, and other specialized workers drove wage pressures for these positions and led to construction project delays in some cases. A contact in Oregon's banking sector reported an uptick in lending to manufacturers for automation projects to stem increases in labor costs that have weakened profitability. ...Manufacturing Activity in the manufacturing sector remained solid. A contact in the Mountain West noted that demand from the mining industry for equipment jumped, leading businesses to expand operations. Deliveries of commercial aircraft increased noticeably from the same period last year, while new orders grew moderately. A steel producer in Oregon observed that there was sufficient capacity to meet the continued elevated demand for their products. |
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© 2017, Bruce Steinberg. All rights reserved. |
last updated July 18, 2018 |
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