Since there are several references to changes 'since the last report,' our summation of the previous report is here.

The next Beige Book is expected to be released on July 13, 2016, 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

Business contacts cite generally improving economic conditions across the First District. Most retail and manufacturing respondents report increasing sales or revenues from a year earlier; this represents a higher fraction compared with six weeks ago. Staffing services firms are seeing growth in placements and revenues. Commercial and residential real estate respondents both cite positive results. Many respondents have net hiring plans and are raising wages modestly for selected existing employees and to recruit in some positions. Contacts continue to report minimal price pressures. Outlooks are generally upbeat as firms expect "more of the same."

Manufacturing and Related Services
Of 11 manufacturing firms contacted this cycle, only one reports declining sales. The latter firm--a maker of brakes and motors for machinery--attributes the decline to the effect of lower commodity prices for mining, oil and gas, and agriculture, with no signs yet of effects of the recent rebound in oil prices. Many contacts report a very strong first quarter, including manufacturers of pressure sensitive film, veterinary products, tools, and scientific equipment, as well as a diversified maker of jet engines and home HVAC systems, among other things. Several contacts indicate that the growth came after a soft second half of 2015 or that first quarter sales were much stronger than expected. For most respondents, the U.S. was a bright spot; Europe was not as strong, although not declining as in some earlier reports. Contacts note that Chinese growth has slowed but is still positive; the only problem area appears to be Latin America, in general, and Brazil, in particular. ...

None of our contacts reports significant revisions to their employment plans. A manufacturer of mail-room equipment says they reduced staff, but the reduction reflects planned efficiency improvements and not any reduction in demand. Two contacts report regional shifts. A diversified manufacturer reports moving divisional headquarters out of New England at least partly because of the high cost of labor in the region. Another is expanding production in Nebraska instead of Massachusetts due to the lower cost of labor. Three contacts report having difficulty finding skilled technical and scientific workers. No firm reports significant revisions to their capital expenditure plans. Even the firm with declining sales has not changed its investment plans. ...

Staffing Services
New England staffing services contacts generally report strong business activity through May, with upticks in both direct hires and temporary placements, and year-over-year revenue increases ranging from 1 to 35 percent. Contacts observe an increase in underlying business confidence in recent months, along with heightened market competition for workers. As a result, workers reportedly have more choices in jobs and starting salaries. Labor demand continues to be robust, with increased client demand for specialized workers in the internet technology, software, legal, medical, mechanical engineering, business services, and management consulting sectors. Workers with less specialized or non-technical skills are less in demand. Contacts report that labor supply decreased in recent months, which they attribute to a decline in overall unemployment, as well as some mismatch of skills between labor supply and demand. Firms are utilizing social media and referral networks, and offering sign-on bonuses in order to recruit job candidates. Both bill and pay rates increased from 3 to 10 percent year-over-year. Firms are reportedly recognizing the need to pay higher wages to attract top talent, and workers are negotiating higher starting salaries. Looking forward, contacts are optimistic, expecting steady sequential and year-on-year growth. They expect to end the year with year-over-year revenue increases in the low to mid-single-digit range.

Second District  --  New York (CT, NJ & NY)  return to District list

Manufacturing

Reports of overall activity fell into slightly negative territory, since the prior Beige Book period, as did reports of shipments and new orders. Firms also reported that the number of employees continued to fall slightly and the average employee workweek fell sharply after rising somewhat during the last period. The makers of chemicals, electronics, and primary metal products appeared to contribute to the overall decline in activity. The makers of lumber, instruments, industrial machinery, and fabricated metal products noted the greatest improvement from the prior period and compared with the prior year; contacts with paper products firms have reported improvements since last period, but not as strong as last year. Firms continued to note stronger demand from the housing and consumer sectors, while demand from the energy sector remained weak. Overall, contacts expressed somewhat higher expectations of growth during the next six months than during the last Beige Book period. This improvement was driven by slightly increased percentages of firms expecting increases in shipments, new orders, and general activity than during the prior period. Expectations of future capital expenditures and future employment also rose.

Price and Wages

On balance, general price levels have continued to rise slightly since the previous Beige Book period. About 65 percent of all contacts reported no significant change in the prices they pay nor in the prices received for their goods and services--a somewhat lower percentage than last period. Of the firms that indicated a change, more indicated price increases than decreases except for prices received by nonmanufacturers, who tended to report declines. Overall, contacts are beginning to report more signs of modest wage pressure--some firms have experienced greater turnover or raised their own starting wages, while staffing contacts reported shifting their rate structure upward and receiving more push-back from recruits on salary offers.

Over the next four quarters, nonmanufacturing firms expect their own compensation costs per employee (wages plus benefits) to rise 2.5 percent; manufacturing firms expect a 3.0 percent increase. Firms also reported expectations of 2 percent annual inflation for consumers and 2 percent increases in prices received for their own goods and services.

Fourth District  --  Cleveland (KY, OH, PA & WV)  return to District list

Manufacturing

Fifth District  --  Richmond (MD, NC, SC, VA & WV)  return to District list

The Fifth District economy continued to expand in recent weeks. Manufacturing activity increased moderately for most firms. Retail sales growth was flat on balance since the previous report, while revenues continued to grow modestly at other services firms. ... In District labor markets, demand rose moderately on balance, accompanied by some upward wage pressure. According to our most recent surveys, employment increased modestly at manufacturing and non-retail services firms, while retail hiring was flat. Wage gains were evident across a broader array of manufacturing and service sector firms. ...

Labor
On balance, the demand for labor rose moderately since our previous report. A staffing agent in Maryland indicated an increase in demand for almost every occupation with the exception of entry-level office jobs like customer service and clerical positions. A job matching firm stated that new job openings were outpacing new job seekers on their site. Throughout the District, contacts noted continued recruitment difficulties, even for entry-level production workers. Challenges were reported in finding engineers, nurses, medical technicians, machinists, industrial production workers, architects, sales and marketing professionals, farm hands, and construction workers. According to our most recent surveys, employment increased modestly at manufacturing and non-retail services firms, while retail hiring was flat. Reports of upward wage pressures increased modestly in recent weeks. A western North Carolina executive reported substantial upward wage pressure in the hospitality industry as restaurants, hotels, and health care employers compete for many of the same people. In Maryland, a temporary employment agent said his firm was successful in getting wage increases in most job categories, particularly for entry-level positions. More manufacturing firms reported increasing wages than in the prior period, and the average workweek lengthened for manufacturers, according to our surveys. Fewer services providers reported wage increases in recent weeks.

Sixth District business contacts reported economic activity continued at a modest pace from April through mid-May. The outlook among contacts remains optimistic with most firms expecting growth to be higher than current rates over the next three to six months.

District merchants reported modest sales growth over the reporting period. ... District firms continued to report difficulties filling a range of positions. Wage pressures remained modest and non-labor input cost pressures were subdued.

Manufacturing contacts across the region indicated that activity remained relatively strong from April through mid-May. New orders and production levels were reported to have increased from the previous report. Payroll levels also continued to increase, while supplier delivery times were longer than in the previous report. ...

District firms seeking employees for high-demand fields, such as information technology, healthcare, engineering, and construction continued to experience difficulty filling jobs. Business contacts also indicated that low-skill positions were becoming more difficult to fill. Layoffs continued in the oil and gas (O&G) industry, as well as other industries and areas with O&G business dealings. Contacts in parts of the District reported that these layoffs had loosened some of the local labor markets.

Many contacts across the District continued to report only modest wage pressure from April through mid-May. However, there were some reports of rising starting pay for low-skill and entry-level positions and ongoing upward wage pressure for some high-skill, low-supply positions. There were also several reports of significant wage increases in construction and skilled manufacturing. ...

Business Spending
Growth in business spending slowed to a modest pace in April and early May. ... The pace of current capital expenditures slowed to a more modest rate as did expectations for future spending. Outlays were primarily for replacing IT and industrial equipment. ... The pace of hiring also slowed to a more modest rate, as did expectations for the future hiring. That said, many contacts indicated that the labor market continues to tighten. Demand continued to be strongest for skilled workers, particularly for many professional and technical occupations, sales, and skilled manufacturing and building trades. Staffing firms again reported flat growth in billable hours and difficulty filling orders at the wages employers are willing to pay. In contrast, an online recruiting firm reported healthy growth in customers. ...

Cost pressures again tightened some in April and early May, but remained mild overall. ... Wage pressures picked up some, but contacts were more likely to report higher wages for select jobs than across-the-board increases. Growth in non-wage labor costs was steady.

Employment, Wages, and Prices

Services
The services sector grew modestly since the last report. A Minnesota telemedicine services company acquired a national software company, marking the fourth acquisition in the past 18 months. Due to increased demand, a Minneapolis-St. Paul information technology company experienced 75 percent growth in its contract business since this time last year. Brookings, S.D., recently opened a shared community workshop and creative space (referred to as Makerspace) and has 30 paying members.

Manufacturing
Manufacturing increased modestly since the last report. An April index of manufacturing conditions indicated expansion in South Dakota but contraction in Minnesota and North Dakota. In a separate survey of Minnesota manufacturers, 90 percent were optimistic for 2016. A producer of window and door components unveiled plans for a $10 million plant in Sioux Falls, and two different food manufacturers in Minnesota announced separate $100 million plant expansions. A custom contract manufacturer reported that orders from industrial customers were up since the beginning of the year, but demand from agricultural equipment producers remained weak.

Manufacturing and Other Business Activity
Manufacturing activity continued to decline modestly in late April and May, while other business activity was varied. The continued decline in manufacturing was driven by both durable and nondurable goods factories, particularly for food, machinery, and plastics products. Factory activity remained weak in most District states. Production, shipments, and export orders fell modestly, and activity remained lower than the previous year. Manufacturers' capital spending plans continued to decline but at a slower pace, and expectations for future activity improved moderately.

Outside of manufacturing, professional and high-tech firms reported a moderate increase in sales, with slight improvements expected in future months. Transportation and wholesale trade contacts noted considerable declines in activity, and many firms expected sales to slow further in the next three months. Professional and high-tech firms reported favorable capital spending plans, while transportation and wholesale trade contacts expected capital spending to remain mostly flat.

Wages and Prices
Across the District, input and selling price growth was mixed, while wages grew slightly since the previous survey period. ... Contacts reported a shortage of commercial drivers, various skilled technicians, and some entry-level workers.

Economic activity in the Eleventh District rose marginally over the past six weeks. Manufacturing activity ticked up ... Reports of employment changes and price pressures were mixed. Outlooks were generally positive but cautious.

Employment reports varied across sectors. Hiring in manufacturing was mostly limited to replacing departing workers, while energy service firms continued to trim payrolls. Retail employment was flat, and one contact said they were cutting hours of store associates because of weak sales. There were reports of hiring in the service sector, with accounting firms noting ongoing labor shortages, and some leisure and hospitality firms planning to hire more seasonal workers than previously expected. Continued labor shortages for certain construction trades were noted as well.

Wage pressures were minimal. Energy service firms said compensation was steady to down for staff that have been retained. There were some reports of continued upward wage pressure for certain construction trades. While some staffing firms reported that clients were seeking low wages, they noted that candidates were not accepting the low offers.

Manufacturing

Overall price inflation was modest over the reporting period. ...

Wage inflation picked up somewhat across the District. Contacts reported that minimum wage increases pushed up wages for low-skilled workers in various service sectors, with diminishing ripple effects up the pay scale. Firms in some states with typically lower labor costs reported that a recent influx of business investment has increased the demand for labor and pushed up wages in general. Rising demand for skilled labor boosted total compensation packages in the aerospace and defense sector. By contrast, wage increases in the semiconductor industry have remained modest. On balance, labor shortages in the construction sector increased wage pressures for skilled workers. One contact in the real estate development industry noted that upward wage pressures had moderated in the San Francisco Bay Area relative to earlier this year.

Retail Trade and Services
On balance, retail sales grew slightly over the reporting period. ...

Activity in the consumer and business services sector expanded at a moderate pace. ... Activity in the transportation sector picked up as next-day deliveries were propelled by strong e-commerce sales. Sales of cybersecurity and cloud computing services picked up further. ...