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July 2019 Federal Reserve Board's Beige Book
DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on July 17, 2019. It "... was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before July 8, 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 scheduled to be released on September 4, 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 expanded at a modest rate in the First District at the end of the second quarter of 2019. ... Manufacturing firms reported slower growth. Contacts attributed slower growth to tariffs, which drove up costs. In addition, trade policy uncertainty reduced capital expenditures. Software and IT services firms reported mixed growth. ... Employment growth was mixed: some manufacturing firms laid off workers while other contacts reported difficulty finding workers. Tariffs drove price increases at some firms. Wage and pricing pressure was otherwise modest. Outlooks were positive with some downward revision. Employment and Wages Contacts reported that wage pressure remained modest. Some firms reduced hiring or laid off workers, but those hiring continued to report a very tight labor market. Manufacturing firms directly affected by tariffs were among the firms with reduced demand for labor. ... Manufacturing and Related Services Reports from our contacts continued to be mixed. The big story this cycle is trade policy, which six of seven contacts discussed in detail. Contacts attributed higher costs, reduced demand and higher uncertainty to trade policy. Contacts said it was typically hard or impossible to divert to non-Chinese suppliers. .... Indirect costs of the tariffs were also significant. For example, one contact complained about having to hire consultants to change computer systems to track the cost of tariffs. Contacts said the US tariffs and foreign retaliation had weakened demand for their products. ... One contact reported that previous problems finding trucking capacity had ebbed. Five of seven contacts reported flat or reduced employment. A frozen fish manufacturer said it was unable to find workers. A manufacturer of electronic components said it had laid people off as a result of the tariffs, with headcount declining by about 10 percent. For example, the firm had moved an assembly line from the U.S. to Germany because most of the components in the product came from China and making the product in Germany allowed them to avoid the tariffs. ... A majority of contacts said they had negatively revised their outlooks. The major reason was trade policy. Software and Information Technology Services Software and IT firms reported mixed outcomes from this past quarter. Half our contacts reported demand and revenue growth that exceeded expectations, attributable to improving business efficiency, newer cloud-based or Internet of Things product lines, and introduction of month-to-month subscription pricing options. Other contacts reported either no change in demand from last year, or decreases in demand in the low single digits. Prices showed no change over the last quarter and one contact who had previously mentioned the potential for price increases later in the year no longer mentioned that possibility. Headcount remained stable with no change quarter over quarter or year over year for the majority of firms. Most contacts remain largely optimistic going into the next quarter mixed with slight apprehension looking toward 2020. Second District -- New York (CT, NJ & NY) return to District list Growth in the Second District economy slowed to a modest pace in the latest reporting period. The labor market remained very tight, though job growth was tepid, and wage growth largely remained subdued. ... Manufacturing activity declined, while growth in the trade and distribution industries slowed considerably. However, most service sectors saw steady to modestly growing activity. ... Employment and Wages The labor market has remained very tight throughout the District. Contacts reported persistent difficulties finding workers across the spectrum — in particular, those with IT skills, truck drivers, and construction workers. An employment agency indicated that demand for temporary workers has diminished, as firms are increasingly inclined to hire permanent workers. A payroll service firm noted that job growth slowed in June, but largely because employers have had more trouble filling job openings. A number of contacts noted difficulties in securing and renewing H1B visas for specialized workers, and cited uncertainty about this as a problem. Businesses generally reported slowing in hiring activity. Contacts in the manufacturing, transportation, and information sectors reported that, on balance, headcounts have declined, while professional & business service firms indicate little change. Contacts in other service sectors, as well as construction and real estate, reported continued modest growth in employment. Still, contacts in both manufacturing and in most service sectors plan to increase staffing levels in the months ahead. Despite persistently tight labor markets, businesses and employment agencies generally report continued modest wage growth. Exceptions to this include certain high-skill occupations, such as IT workers and engineers, as well workers in the education & health sector more broadly. Manufacturing and Distribution The manufacturing and distribution sectors have weakened since the last report. Manufacturers reported that overall activity and new orders have contracted modestly in recent weeks. Wholesale distributors reported that growth slowed sharply, and transportation firms noted that activity was flat to rising modestly. Looking ahead, manufacturing contacts remain fairly positive about the near-term outlook, while wholesale distributors and transportation firms have become somewhat less optimistic. Businesses have continued to express concern about tariffs, trade uncertainty, and the increase in New York State's minimum wage. Services Service-sector businesses reported that activity was mixed but, on balance, little changed in the latest reporting period. Contacts in real estate, information and leisure & hospitality noted increased business, while contacts in finance reported declining activity. Businesses in education & health and professional & business services indicated flat activity. ...
Third District -- Philadelphia (DE, PA & NJ) return to District list On balance, aggregate Third District business activity continued at a modest pace of growth during the current Beige Book period. Manufacturing slowed to a slight pace of growth, but nonmanufacturing, nonauto retail sales, and tourism continued at a modest pace of growth.... Contacts continued to note that trade uncertainty was constraining business investment and expressed relief that tariffs had not been imposed on Mexican products. Wage pressures appeared to rise further, as the labor market remained tight. Overall, price pressures eased but remained modest. The firms' outlook for growth over the next six months remained positive but softened, with about two-fifths of all firms anticipating increases in general activity and less than one-fifth expecting decreases. Employment and Wages Employment growth continued at a modest pace during the current Beige Book period. More than one-fourth of all firms reported increases in staff. On balance, average work hours declined across firms. Staffing firms noted that new client orders kept pace or resumed a pace consistent with moderate labor demand, but a lack of interested, qualified applicants constrained fulfillment to a modest pace. ... A shore contact noted that the tight labor market nationwide led to greater demand for H-2B visas—widely used by seasonal vacation spots. Thus, far fewer visas were awarded to local businesses than had been expected. Owners were observed working their own counters. Wage growth continued at a moderate pace, but more reports of wage and benefit cost increases — ranging above 3.0 percent to as high as 5.0 percent — suggest that pressure is rising. The share of nonmanufacturing contacts who reported increases in wage and benefit costs rose to over 45 percent; only 2 percent reported decreases. Staffing contacts noted that some manufacturers cannot offer a wage sufficient to attract workers for nontraditional shifts (e.g., night shifts and weekends). Manufacturing On balance, manufacturers reported slight growth in activity — a slower pace than in the prior period. Shipments and unfilled orders remained somewhat above long-term nonrecession averages; however, the new orders index slipped below its average. ... Most firms continued to note some negative effects from tariffs, including higher costs, lower profit margins, greater uncertainty, and lower capital expenditures on new industrial capacity. Food processors noted relief that tariffs were not imposed on imports from Mexico. Manufacturers' expectations of activity over the next six months changed little and remained subdued. However, expectations of shipments and of new orders shifted higher and are at or above long-term nonrecession averages. Expectations of future employment and planned capital spending also remain above average, with the latter rising higher over the period. Nonfinancial Services Service-sector firms noted some slowing, but overall, they maintained a modest pace of growth. The percentage of firms reporting increases in current revenues fell, although the percentage reporting increases in new orders edged up. The firms commented on rising uncertainties, including tariffs, inadequate labor supply, uncertain federal policy, and signs of an economic slowdown. One large firm noted a slight uptick in delinquent accounts receivables of its consumer base. The share of firms expecting growth over the next six months fell considerably to under one-half from nearly two-thirds.
Fourth District -- Cleveland (KY, OH, PA & WV) return to District list Economic activity remained stable and solid since the prior reporting period. Professional and business services firms continued to report strong growth. ... Manufacturing continued to weaken because of trade wars, high customer inventories, and slowing global growth. ... Employment increased modestly over the period, almost entirely because of hiring in professional and business services. Wages grew modestly overall, with gains reported in most sectors. ... Employment and Wages Employment in the District increased modestly over the period. Professional and business services firms drove the bulk of hiring. Staffing firms placed more permanent employees than in the prior period. ... Manufacturers reported generally stable employment as well. With the exception of seasonal hiring, construction employment was unchanged. ... Wages rose modestly overall, with wage growth in most sectors. ... Fewer professional and business services firms raised wages in this period than had in the prior two periods, but some cited poaching of employees as motivating continued wage increases. Several manufacturers implemented cost-of-living increases, and a few also raised wages for retention. ... Manufacturing Conditions in the manufacturing sector weakened further. While contacts continued to cite trade-related factors as causes for the slowdown, many reported that broader economic forces were also at work. A large ramp up in activity in 2017 and 2018 led many customers to overbuild inventories, leading to slower current demand. Meanwhile, slowing global growth, adverse weather — which has impacted construction activity—and other factors have also contributed to the weakening. Materials costs continued to fall, particularly for steel. There were fewer reports than in the prior period that falling prices have bolstered demand. Professional and Business Services Professional and business services firms saw robust growth, as almost 70 percent of firms reported improving business conditions over the period. Improved interest in offerings, new partnerships, and larger pools of funding were cited as some of the primary drivers of growth in the sector, and firms expected these positive conditions to continue. However, political uncertainty, trade policy, and uncertainty regarding the risk of a downturn were cited by some contacts as notable risks to the sector.
Fifth District -- Richmond (MD, NC, SC, VA & WV) return to District list Since our previous Beige Book report, the Fifth District economy grew at a modest rate. Manufacturers saw a slight increase in shipments and new orders, but continued to face challenges from the current trade environment. ... Labor markets strengthened, overall, but employers continued to face challenges finding workers and were increasing wages at a moderate rate. ... .Employment and Wages Labor demand strengthened moderately in recent weeks. Employment agencies reported growth in new job openings across all the industry segments they service. Meanwhile, employers across sectors continued to report tight labor markets and difficulty filling positions, particularly for skilled tradespeople, engineers, experienced bankers, IT professionals, and hospitality workers. Wages reportedly grew at a moderate rate, overall, and several firms are increasingly using non-wage benefits, such as flexible work arrangements and additional paid time off, to attract and retain workers. Manufacturing On balance, manufacturers in the Fifth District reported mild growth in recent weeks, with shipments and new orders increasing slightly. A cabinet manufacturer reported solid growth in business, and a food manufacturer planned to increase capital expenditures because of strong demand. On the other hand, several contacts continued to report challenges with tariffs and the trade environment. For example, a North Carolina furniture manufacturer was unable to pass tariff-related cost increases on to customers, and a West Virginia rubber manufacturer attributed a drop in business from Chinese customers to the trade wars. Non-Financial Services On balance, demand for nonfinancial services strengthened moderately in recent weeks. Engineering and architecture consulting firms saw strong growth. Overall, health care providers reported growth in services and reimbursements; however, revenues declined in rural hospitals in one area in Virginia. Some firms were concerned that growth could slow in the near future, but they had not altered capital expenditure plans. In fact, one contact reported increased spending on software upgrades and PC replacements.
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 contacts shared concerns over uncertainty related to tariffs, the overall outlook among businesses remains positive as most expect continued modest growth for the second half of the year. District firms continued to report difficulties filling positions. On balance, wage growth remained steady. ... Manufacturers reported growth in new orders and increasing production levels. ... Employment and Wages Contacts continued to report hiring challenges. However, a few transportation contacts observed some easing in the labor market tightness for drivers over the last couple of months. Some employers noted relaxed policies or standards to hire and retain workers. Broadly, firms continued efforts to expand their pools of prospective employees, e.g., pursuing recent veterans, and partnering with other organizations to develop or enhance vocational centers. Firms indicated investing significantly in training programs to attract new workers or upskill existing staff. A number of contacts expressed that hiring and retention costs were rising, primarily associated with training and certification programs. Annual wage increases, on average, remained between 3 - 4 percent. For lower-skilled hourly workers, several employers reported increasing wages to $15 per hour, depending on competition. While many contacts pointed out that employee bargaining power increased, non-financial benefits focused on work-life balance often dominated demands, rather than higher wages. Manufacturing Manufacturers reported a modest increase in overall business activity. New orders and production levels continued to increase, although the pace decelerated slightly from the previous reporting period. ...
Seventh District -- Chicago (IA, IL, IN, MI & WI) return to District list Economic activity in the Seventh District was little changed on balance in late May and June, though contacts expected it to grow at a modest pace over the next 12 months. Employment increased modestly; business spending increased slightly; consumer spending and construction and real estate activity were flat; and manufacturing decreased slightly. Wages and prices rose modestly and financial conditions improved modestly. More wet weather put further stress on farmers. Employment and Wages Employment increased modestly over the reporting period and contacts expected a similar-sized increase over the next 12 months. Hiring continued to be focused on professional and technical, sales, and production workers. As they have for some time, contacts indicated that the labor market was tight and that it was difficult to fill positions at all skill levels. A staffing firm reported little change in billable hours. Wage growth remained modest overall. Contacts were most likely to report wage increases for professional and technical, administrative, and production workers. Many firms reported increased benefits costs. Business Spending ... Capital spending moved up slightly, though contacts expected a larger pickup over the next 12 months. Outlays were primarily for replacing industrial and IT equipment and for renovating structures. ... Manufacturing Manufacturing production decreased slightly in late May and June; in general, however, contacts remained comfortable with the level of activity. Demand for steel declined; the drop was broad-based with the exception of the energy sector, where demand was flat. Specialty metals manufacturers reported a slight drop in demand, as lower demand from the auto and construction industries outweighed growth in the aerospace and defense sectors. Order books for heavy machinery manufacturers decreased slightly, due to lower demand from agriculture. Demand for heavy trucks and auto production both slowed some, but remained at solid levels.
Eighth District -- St. Louis (AR, KY, IL, IN, MO, MS & TN) return to District list Reports from contacts suggest economic conditions have improved slightly since our previous report. Labor market conditions remained tight, with slight growth in employment and a moderate increase in wages. ... Manufacturing activity improved moderately. ... Employment and Wages Employment has increased slightly since the previous report. Survey-based measures of employment indicated slight-to-modest growth in manufacturing employment in Arkansas and Missouri. Small business employment declined slightly throughout the District. Contacts continued to report labor market tightness for employees across a broad range of skill levels. To attract and retain workers, firms reported offering a wide array of benefits, including extended parental leave, teleworking opportunities, and assistance with student loans. Furthermore, local governments and companies announced several new education and training initiatives as part of long-term efforts to fill skilled trades, transportation, and tech positions. Wages have grown moderately since the previous report, in part due to upward pressure from the tight labor market. Contacts in healthcare and the public sector in particular reported pay increases resulting from increased competition for workers. However, small business wage growth was more modest. Manufacturing Manufacturing activity has increased moderately since our previous report. Overall manufacturing activity in May was stronger than one month earlier in both Arkansas and Missouri, although the pace of growth slowed. Both production and new orders increased in each state. Several companies across a variety of industries announced new capital expenditure and hiring plans throughout the District. Nonfinancial Services Activity in the services sector has improved slightly since the previous report. The number of posted vacancies for nonfinancial services occupations increased from April to May in Louisville, Memphis, and St. Louis. ...
Ninth District -- Minneapolis (MI, MN, MT, ND, SD & WI) return to District list The Ninth District economy grew at a modest-to-moderate pace since the last report. Employment grew modestly, while wage pressures were moderate and price pressures were modest. ... Employment and Wages Employment grew modestly since the last report. Recent surveys by the Minneapolis Fed and others suggested that labor demand continued at a healthy pace. A quarter of respondents to the Minneapolis Fed's annual survey of professional services firms planned to increase staffing levels over the coming year, while only 5 percent expected to cut head counts. A poll of greater Minnesota firms showed that 63 percent were hiring, about half of whom were expanding head counts; only 3 percent were cutting employees. A poll of staffing firms, most of them in Minneapolis-St. Paul, found that total job orders and clients have risen modestly over the past two months compared with the same period a year ago; expectations for job orders over the remainder of the summer were slightly higher. Larger employment gains were restrained by low labor supply. Unfilled job orders have risen modestly among staffing firms, and many said labor market tightness was getting worse. "Toughest market I have ever seen," said one. A health care contact in Montana said, "We flat out cannot find enough workers." Four of five respondents to the poll of greater Minnesota firms said that tight labor was negatively affecting business. Some softness was also present in the job market. Initial unemployment claims rose by 3 percent over the most recent six-week period (ending in early June) compared with a year earlier; each District state saw an increase. However, continuing claims trundled lower, falling by almost 8 percent over the same period. Wage pressures were moderate overall, but varied. Despite strong hiring demand and tight labor, nearly 70 percent of respondents to the ad hoc poll of greater Minnesota businesses said wages rose less than 3 percent over the past 12 months, and a notable share said they rose less than 1 percent. Their wage expectations for the coming 12 months were slightly lower. Among professional services firms, two-thirds reported wage increases of 3 percent or more, but their wage outlook for the year ahead was also lower. Minnesota staffing firms reported stronger wage growth, with almost half reporting 12-month wage growth of 5 percent or more. However, expectations of future wage increases were somewhat lower. Manufacturing District manufacturing activity increased modestly. An index of manufacturing conditions indicated increased activity in June compared with a month earlier in Minnesota and the Dakotas. A steel manufacturer reported solid demand that they were unable to meet due to labor force constraints. Several diversified contract manufacturers described activity as stable, with demand from nondurable goods generally stronger than from consumer products. However, some manufacturing contacts reported concerns about a slowdown in the sector. ...
Tenth District -- Kansas City (CO, NM, MO, NE, OK & WY) return to District list Economic activity in the Tenth District continued to expand slightly in late May and June, and contacts generally expected a faster pace of growth moving forward.... Contacts in the manufacturing, wholesale trade, and professional and high-tech services sectors noted flat activity, while respondents in the transportation sector reported modestly lower sales. ... Employment and employee hours held steady across the District, while a majority of respondents noted labor shortages. Wages continued to rise at a modest pace since the previous survey period. ... Employment and Wages Overall employment and employee hours were fairly steady since the previous survey period, and employment was expected to rise modestly in the months ahead. Contacts in the retail trade, wholesale trade, real estate, professional and high-tech services, tourism, restaurant, and manufacturing sectors noted steady or rising employment, while respondents in auto sales and health services noted a decline. Employee hours were mixed across reporting sectors. A majority of contacts continued to report labor shortages for low- and medium-skill workers, including construction workers, truck drivers, hourly restaurant and hospitality positions, and auto technicians. A few respondents also noted shortages in high-skill occupations such as pharmacists, IT personnel, engineers and pilots. Wage growth continued to rise at a modest pace since the previous survey period, and additional gains were expected moving forward. Manufacturing and Other Business Activity Manufacturing activity was flat compared to the previous survey period, and business contacts in the wholesale trade, transportation, and professional and high-tech sectors reported flat or falling sales. Factory production fell slightly due to a decline in activity at durable goods plants, notably those producing computers, electronic products and transportation equipment. Shipments and new orders in the manufacturing sector remained mostly flat, but modest increases were expected in the coming months. ... ... Contacts in the professional, high-tech, and transportation sectors expected sales to expand slightly-to-modestly in the months ahead, while wholesale trade sector contacts anticipated strong sales growth moving forward.
Eleventh District -- Dallas (LA, NM & TX) return to District list Moderate expansion continued in the Eleventh District economy. Growth in nonfinancial services and manufacturing sectors picked up in June. ... Outlooks improved among service sector contacts but worsened among manufacturers and uncertainty increased due to growing concern over tariffs and trade tensions. About 28 percent of respondents to the supplemental questions in the June Texas Business Outlook Surveys indicated being negatively affected by the tariffs while only 5 percent noted a positive impact. Employment and Wages Employment expanded moderately during the reporting period, though there were scattered reports of layoffs. Contacts noted continued difficulty in finding mid-skilled workers. ... Labor market tightness in the homebuilding industry eased slightly. ... Wage pressures generally remained elevated, particularly in energy-intensive areas, and most staffing firms were raising billing rates. There were multiple mentions of rising health care costs. Manufacturing Expansion in the manufacturing sector picked up in June following softening in May. Output growth in durables was sluggish due to softening in primary metals, fabricated metals, and computer products manufacturing. However, expansion in nondurable goods manufacturing strengthened, with food and chemical manufacturing remaining bright spots. ... Overall outlooks among manufacturers deteriorated, with trade negotiations and tariffs and uncertainty in energy markets weighing on sentiment. Nonfinancial Services Growth in nonfinancial services activity was broad based and accelerated in June. A few contacts said that lower interest rates and momentum from prior solid demand were supporting activity. Staffing services companies continued to experience year-over-year demand increases, with strength widespread geographically and across industries. ... Service-sector outlooks were optimistic on net, although uncertainty surrounding trade policy remained a drag on expectations of future activity.
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, employment growth was modest, and wage growth was moderate. ... Employment and Wages The labor market remained tight and employment growth was modest. Some contacts reported that employment growth would have been higher if not for persistent shortages of qualified labor. In Eastern Washington, a large employer in the utility sector shifted some of its existing workforce into information technology-related functions, given the difficulty of hiring for those roles. To fill vacancies in construction positions, some employers in Idaho discussed whether to relax certain hiring standards related to drug testing. In Southern California, some employers increased investments in workforce development programs to hire and train workers from labor pools that may have been overlooked in the past. Wages continued to rise moderately over the reporting period due to brisk competition for qualified workers across sectors. ... A few businesses continued to adjust to increased minimum wages in their states, which have put upward pressures on starting pay. Some businesses relied increasingly on signing bonuses and expanded benefits packages to fill vacancies. Manufacturing Activity in the manufacturing sector was mixed. Production of heavy building machinery and construction materials like asphalt declined somewhat due to lower domestic demand. Some of the weaker demand was attributed to poor weather in regions outside of the District, which delayed building projects there. ... In Northern California, activity in the semiconductor sector recovered from a dip in recent months, with healthier sales and inventory levels. |
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© 2019, Bruce Steinberg. All rights reserved. |
last updated July 17, 2019 |
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