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November 2017 Federal Reserve Board's Beige Book

DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on November 29, 2017. It "... was prepared at the Federal Reserve Bank of St. Louis based on information collected on or before November 17, 2017. 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 January 17, 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.

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First District -- Boston Fifth District -- Richmond Ninth District -- Minneapolis
Second District -- New York Sixth District -- Atlanta Tenth District -- Kansas City
Third District -- Philadelphia Seventh District -- Chicago Eleventh District -- Dallas
Fourth District -- Cleveland Eight District -- St. Louis Twelfth District -- San Francisco



First District  --  Boston (CT, MA, ME, NH, RI & VT)  return to District list

Business activity in the First District continued to expand at a modest to moderate pace in recent weeks. With a few exceptions, contacted retailers and manufacturers cited positive growth in sales or revenues. Most responding staffing firms also realized revenue gains, even in the face of limited available labor. ... Retailers and manufacturers retained positive outlooks about the US economy and customer demand.

Employment and Wages

Respondents said hiring has generally been modest, partly because of short supplies of labor, and wage increases were becoming somewhat more widespread. A couple of retail contacts expected to offer 2018 merit raises on the order of 2 percent to 3 percent; retailers were hiring only in connection with new store openings. Only two manufacturing contacts reported significant hiring, both in semiconductor-related markets. A maker of testing equipment said that they were hiring mostly outside the United States; another indicated that salaries were rising significantly only for engineers who remain difficult to hire and retain. At staffing firms, bill rates and pay rates have reportedly begun to rise at a faster pace, and clients were offering more generous signing bonuses, paid leave, and other perks to attract talent.


Manufacturing and Related Services

Of the eight firms we contacted this cycle, six reported year-on-year sales growth in the most recent quarter. The two exceptions were a furniture company which suspected that the weakness was largely seasonal and a paper manufacturer which said that sales were flat and that significant marketing was required to avoid declining sales. Three semiconductor-related firms reported strength. One of our contacts in that industry said that demand growth had previously been confined to the auto industry but that in recent months, other parts of their market expanded. A manufacturer of testing equipment said that most of their demand growth came from Europe, especially Germany, and that US growth was slowed by the hurricanes. A manufacturer of veterinary supplies said that people were willing to spend more and more on their pets. Two firms reported upward revisions to their capital spending plans, but both described them as idiosyncratic to the firm.

All the manufacturing respondents were optimistic about 2018. A maker of semiconductor equipment said that the industry may reach the peak of its cycle relatively soon.

Staffing Services

New England staffing firms reported mixed results in year-over-year revenue growth, with the majority of respondents achieving positive growth. All firms remarked heavily on the sparse supply of labor and increased search cost in locating talent while noting that labor demand remains very strong across the board. Health and tech jobs were reportedly particularly difficult to fill. Several also noted that increasing options for job seekers were resulting in more declined job offers and putting pressure on hiring firms to improve their packages for prospective employees. Most are devoting resources to improving their recruitment, both in technological efficiency and increased advertising, looking for new ways to reach potential hires. Contacts expressed some concern over uncertainty in health insurance markets, local minimum wage increases, and potential changes in the federal tax code, and what these would mean for the labor market.

All respondents expected tight labor market conditions to continue into 2018, and most saw a more challenging market for staffing firms with increased competition for the remaining labor supply.


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

Economic activity in the Second District continued to grow at a moderate pace in the latest reporting period, and the labor market has been steady and tight. ... Manufacturers reported that growth slowed to a moderate pace, while businesses engaged in wholesale trade, leisure & hospitality, and professional & business services reported brisk growth. However, contacts in health & education services and transportation noted slight softening in activity. ...

Employment and Wages

The labor market has been steady and tight. Employment agencies generally report that labor market conditions have been little changed. Still, one major New York City agency notes that hiring activity has been busy for this time of year. Businesses have reported ongoing difficulty finding qualified workers, particularly in manufacturing.

Business contacts across most industries indicated that they continue to increase staffing levels modestly. Similarly, hiring plans for the months ahead have remained moderately positive, on net, with particularly strong hiring expected in the finance sector. A contact in upstate New York noted that some retailers plan less seasonal hiring this year.

Overall, contacts indicated that wages have continued to rise modestly. Further, businesses in a broad range of industries said they plan to raise wages in the months ahead--most notably in the leisure & hospitality, education & health, transportation, and trade sectors.

Manufacturing and Distribution

Manufacturers reported continued growth in business activity in recent weeks, though to a lesser degree than in recent months. Contacts in the wholesale trade sector noted a further acceleration in business, whereas transportation firms reported some pullback in activity. Looking ahead, manufacturers continued to express widespread optimism about the near-term outlook, while wholesale distributors and transportation firms were moderately optimistic.


Service-sector firms noted some pickup in growth. Contacts in leisure & hospitality and professional & business services reported fairly widespread increases in activity, while information industry firms indicated modest improvement. Education & health service providers indicated that activity was flat to slightly lower, on balance. Service sector businesses were generally optimistic about the near-term outlook--particularly those in business & professional services. ...

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. Manufacturing, nonfinancial services, and tourism grew modestly, while new home construction, existing home sales, nonresidential construction, and leasing appeared to grow slightly. ... On balance, employment resumed a modest pace of growth, and wages and prices continued to grow modestly. Overall, firms appear to anticipate continued growth over the next six months, but with a somewhat smaller percentage of firms expecting growth.

Employment and Wages

Employment resumed a modest pace of growth during the current Beige Book period following a lull during the prior period. Reports of net additions to staff rose for both manufacturing and nonmanufacturing firms. Average hours worked changed little over the period for manufacturing firms but dipped a bit among nonmanufacturers. Retailers reported little change to their typical hiring plans in preparation for the holidays.

On balance, wage growth held steady at a modest pace, with about 40 percent of nonmanufacturing firms reporting increases. Numerous firms have reported a lack of qualified labor for skilled positions or that they are offering a somewhat higher entry-level wage to attract labor. Staffing firms continued to report difficulties filling job orders and noted that an inordinate amount of their business is refilling positions due to turnovers, including quits by recent placements.


On balance, manufacturing activity continued at a modest pace of growth, but signs of a slowdown emerged. The percentage of firms reporting increases in new orders and shipments fell compared with the prior period.

The makers of paper products, chemicals, primary metal products, fabricated metal products, and industrial machinery continued to note gains in new orders and shipments; firms in the lumber and electronic equipment sectors reported declines in activity.

Generally, manufacturing contacts continued to expect growth over the next six months. The percentage of firms expecting future increases for general activity dipped somewhat but remains above 50 percent. However, the percentage of firms expecting increases held mostly steady regarding future capital expenditures and rose a bit for future employment.

Nonfinancial Services


Service-sector firms have continued to report modest growth in general activity since the prior Beige Book period; however, new orders and sales softened somewhat, as did reports of general activity. Expectations about future growth have lessened somewhat since the prior Beige Book period but remained positive, with about 50 percent of the firms anticipating increased activity.


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


Business activity grew at a moderate pace in the Fourth District since our last report. Labor markets continued to tighten. Challenges in attracting and retaining qualified workers contributed to wage pressures. ...

Employment and Wages


A boost in hiring that began in the third quarter continued during the survey period. The strongest activity was found in the construction and nonfinancial services sectors. Retailers reported a seasonal increase in payrolls. The spike in bank hiring late in the third quarter has faded. Staffing changes at banks are now in line with levels seen for most of 2017. A majority of contacts reported they are replacing departed workers and that the share of firms creating new jobs remains high. Attracting and retaining qualified workers, both low- and high-skilled, is a challenge facing many of our contacts across industry sectors. A growing number of firms reported increasing wages more frequently or giving mid-year bonuses as a means of retention. The strongest wage pressures were found in the banking and retail sectors.


Little change was seen in the manufacturing sector during the period, with output largely expanding at a modest pace. The strongest levels of activity were reported by suppliers to the aerospace, consumer electronics, motor vehicle, oil and gas, and residential construction industries. ... The outlook by our contacts calls for a gradual pickup in the pace of growth in the near term.

Nonfinancial Services

... Professional and business services firms saw moderate to strong gains in activity during the period. Engineering and architecture firms attributed the gains to clients' rising capital budgets. One architect reported a two-year backlog. An IT firm remarked that clients continue to migrate toward cloud-based solutions versus premise-based solutions as clients struggle to staff their own IT departments.

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


The Fifth District economy grew at a moderate rate since our last Beige Book report. Manufacturers noted a moderate rise in new orders and shipments, and they generally expected strong growth over the next six months. ... The demand for labor increased moderately in recent weeks while wage increases remained modest. ...

Employment and Wages

The demand for labor strengthened moderately in recent weeks as employment agencies reported growth in new job openings across all industries and anticipated continued high demand for the rest of the year. Employers continued to report a tight labor market with limited supply of qualified candidates. Executives noted difficulty finding skilled mechanics, electricians, engineers, information technology specialists, hospitality workers, nurses, truck drivers, construction managers, and construction workers. Additionally, retailers had difficulties finding extra seasonal help. Wage increases remained modest, overall, but contacts continued to suggest that wage pressures increased. In particular, wages reportedly rose for airport workers, truck drivers, and for some nonfinancial services workers that were in high demand.


On balance, manufacturing firms reported moderate growth in new orders and shipments in recent weeks. Manufacturers of plastic, rubber, paper, and transportation equipment noted strong growth in new orders. Also, electrical and medical equipment producers saw increased sales. ...

Non-Financial Services

District services firms reported moderate growth in revenues in recent weeks. The strongest reports came from wholesalers, telecom firms, performing arts centers, vehicle repair services, and utilities. ... Business also picked up for legal firms, accounting firms, defense contractors, and IT service providers across the District.


Sixth District  --  Atlanta (AL, FL, GA, LA, MS & TN)  return to District list

Reports from Sixth District business contacts described economic conditions as modestly improving since the previous report. Most businesses continue to expect slow and steady growth for the remainder of the year. District firms continued to describe a tight labor market as many faced difficulty finding workers. Wage growth remained modest. ... Manufacturers indicated that activity grew at a modest pace since the previous report. Bankers reported that ample credit was available.

Employment and Wages

The District, specifically Florida, incurred notable payroll losses in September because of Hurricane Irma. Contacts continued to cite challenges filling highly skilled/specialized and low-skilled/entry-level positions. Several firms noted broadening their geographical search for candidates, and some expanded their physical presence to new locations where they expected more abundant labor supply. In a survey of business contacts, most respondents indicated that they planned to increase employment over the next 12 months as a result of expected sales growth, a need for skills not possessed by current staff, and to mitigate concerns about current staff being overworked. The top factors restraining hiring plans were challenges finding workers with required skills and a desire to keep operating costs low. Amidst these challenges, in an effort to attract workers, most respondents reported that they raised wages, signing bonuses, or total compensation offered.

Contacts continued to report some wage growth, with acceleration in highly skilled/specialized positions or in highly competitive geographic labor markets. Firms continued to use non-wage mechanisms to attract and to retain talent and keep wages down. Business contacts continued to describe efforts to enhance and modernize their corporate culture in order to encourage people to join the firm and to build loyalty among existing employees. Staffing agencies shared that from the job seeker's perspective, these non-wage mechanisms were increasing in importance as compared with compensation.


Manufacturers reported that business activity expanded at a modest pace compared with the previous period. Contacts indicated that production levels decreased, while new orders and finished inventory levels remained relatively flat. Hiring activity increased at a healthy pace and supplier delivery times were reported to be slightly longer than in the previous report. ....


Seventh District  --  Chicago (IA, IL, IN, MI & WI)  return to District list

Economic activity in the Seventh District increased slightly in October and early November, but contacts expected growth to accelerate to a moderate pace over the next 6 to 12 months. Employment and manufacturing production increased modestly, while consumer spending, business spending, and construction and real estate activity increased slightly. Wages rose modestly and prices rose slightly. ...

Employment and Wages

Employment growth continued at a modest pace over the reporting period, and contacts expected it to continue at that rate over the next 6 to 12 months. Contacts continued to indicate that the labor market was tight and reported difficulty filling positions at all skill levels. A manufacturing firm reported turning down business because it was unable to find qualified workers. To address the challenge of finding qualified workers, firms reported that they were raising compensation, increasing advertising for positions, and training less-qualified new hires. Hiring was focused on professional and technical, sales, and production workers. That said, a staffing firm that primarily supplies manufacturers with production workers reported little change in billable hours. Wage growth remained modest overall. Contacts raising wages were more likely to do so for select roles than for all workers. Wage increases were more prevalent for professional and technical, sales, and production workers. There was also a notable increase in the number of firms reporting wage increases for management positions.

Business Spending

Business spending increased slightly in October and early November. Retail and manufacturing contacts indicated that inventories were generally at comfortable levels. Capital spending increased slightly, and contacts expected spending to increase modestly over the next six to twelve months. Outlays were primarily for replacing industrial and IT equipment and for renovating structures, though there was again an increase in the number of contacts reporting spending for capacity expansion. ...


Growth in manufacturing production continued at a modest pace in October and early November. Activity in the auto and aerospace sectors picked up slightly. ... Manufacturers of construction materials continued to report slow but steady increases in shipments, in line with the pace of improvement in construction.


Eighth District  --  St. Louis (AR, KY, IL, IN, MO, MS & TN)  return to District list

Economic conditions in the District have improved at a modest pace since our previous report. Labor market conditions remain tight as most firms reported raising starting wages and salaries as a way to attract new workers. ... Manufacturing contacts reported slight growth, and banking conditions improved moderately. The outlook among District firms surveyed in mid-November was generally optimistic. On net, 49 percent of contacts expect District economic conditions in 2018 to be better or somewhat better than 2017. ...


Employment and Wages

Employment has increased modestly since the previous report. Of the business contacts surveyed in early November, on net, one-third of contacts reported that employment was higher or slightly higher than a year ago. Of those hiring, over half expect to increase their firm's employment over the next year, while 40 percent expect to hire only to replace departing workers. Contacts cited growth of sales, a need for skills not possessed by their current staff, and overworked staff as the top factors for hiring. Contacts cited an inability to find workers with the required skills as a key factor restraining hiring plans, behind only a desire to keep operating costs low.

Contacts have reported moderate wage growth since the previous report, as tightness in the labor market has resulted in upward pressure on wages. On net, 61 percent of contacts reported wages were higher or slightly higher than a year ago, and 68 percent reported increases in labor costs. Nearly 80 percent of those hiring reported raising starting wages or salaries to attract new hires, while about two-thirds reported raising wages or salaries to retain existing employees.


Manufacturing activity has increased slightly since our previous report, although the pace of growth has continued to slow. In a recent survey, contacts reported that production and capacity utilization were unchanged in the fourth quarter relative to one year ago, while a slight majority on net reported an increase in new orders. The results are down from this time last year, when over half of contacts on net reported increases in production and capacity utilization and over one-fourth reported increases in new orders. Contacts are also less optimistic about the next quarter, with only around 10 percent on net expecting increases in production, capacity utilization, and new orders, compared with over three-fourths expecting increases in all three areas at this time last year. Despite the weaker outlook, several companies reported new capital expenditure and facility expansion plans, including firms that manufacture transportation equipment and food products. ...

Nonfinancial Services


Conditions in the service sector weakened from the previous period, but remain positive on net. Reports of fourth-quarter sales were mixed. About one-third of contacts reported higher dollar sales in the current quarter than this time last year; however, one-third reported lower dollar sales. Despite mixed sales reports, about two-thirds of transportation and service contacts reported that sales met or exceeded expectations. Over half of contacts expect sales to be higher in the next quarter than they were last year. Firms that provide information technology services reported plans to expand facilities and hire employees. Reports from the healthcare sector indicate modest growth since the previous period. Healthcare contacts report that heightened uncertainty surrounding policy decisions over the past year has become an operating norm, and some providers are moving forward with small capital expansions.

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 modestly, with solid hiring demand dampened by tight labor. Wage and price pressures were both moderate. The District economy showed varying growth in consumer spending, services, residential construction, commercial and residential real estate, manufacturing, energy, and mining. ...

Employment and Wages

Employment grew modestly since the last report. Hiring demand remained solid overall. Two employers in western Wisconsin announced immediate hiring of 100 workers. A regional health system with facilities in multiple District states noted that it had 1,100 regular openings. October online job openings in North Dakota were flat compared with a year earlier, but that was a notable improvement compared with the previous six months. Two separate surveys showed that hiring sentiment in South Dakota turned modestly positive in October after months of negative sentiment, and sentiment in Minnesota and North Dakota remained positive. Labor markets remained tight. District initial unemployment claims in October were 17 percent lower than a year earlier. A southern Minnesota manufacturer had 100 openings and could open two more lines of production "but can't find workers," according to a local contact. Figures from Montana Jobs Services showed that active job seekers there were roughly one-third lower in October than a year earlier. A Minnesota staffing contact said current hiring demand was 5 percent higher than last year, but turnover remained high, and "we continue to see fewer candidates." However, there were notable signs of softness in some regional markets. In Minnesota, a printing plant, a papermaker, and a food processor all announced plant closures, including layoffs of 335, 150, and 200, respectively.

Wages rose moderately overall since the last report, though accounts varied. A Minneapolis-St. Paul staffing contact said his firm was seeing "a ton of wage pressure this year," with increases of 5 percent to 7 percent. A small ad hoc survey of Minnesota firms found that wages were expected to rise 2 percent to 3 percent in the coming year. A Montana contact said employers "across the board" were raising wages to attract employees. A North Dakota workforce source said wages there were "trickling up." A rural Wisconsin banker noted that tight labor was pushing up starting wages, but longer-term employees were seeing smaller increases similar to previous years. A northern Minnesota firm said it was freezing wages after a poor quarter.


Activity in the professional services industry increased moderately since the last report. An accounting firm with business across the District reported steady growth recently. A contact in the financial services industry noted an increase in start-up activity, particularly among information technology and biotech firms. However, a web marketing company was cutting staff amid restructuring.



District manufacturing activity increased moderately since the last report. An ad hoc survey of Minneapolis-St. Paul inventory managers indicated that recent business activity had increased relative to the same period a year ago and that sales for the remainder of the year were expected to accelerate. An index of manufacturing conditions indicated increased activity in October compared with a month earlier in Minnesota and the Dakotas. A radiator plant in Minnesota and a furniture producer in Wisconsin announced expansions. In contrast, a paper producer shut down a production line at a mill in Minnesota.


Tenth District  --  Kansas City (CO, NM, MO, NE, OK & WY)  return to District list

Economic activity in the Tenth District increased moderately in October and early November, and most sectors expected continued moderate growth in future months. Transportation and manufacturing contacts reported a strong increase in activity, and professional, high-tech, and wholesale trade activity expanded at a moderate pace. ... Employment and employee hours increased in most sectors, and contacts reported modest wage growth with further moderate increases expected. ...

Employment and Wages

Respondents in the wholesale trade, professional services, real estate, and manufacturing sectors reported an increase in employment, while respondents in the auto industry noted a slight decline. A significant majority of respondents in the District expected either increasing or unchanged employment levels in the next twelve months, due primarily to higher expectations of sales growth. Contacts in the manufacturing sector and most of the services sector with the exception of the auto industry reported rising employee hours. Respondents noted a shortage of commercial drivers, skilled technicians, and service workers. The primary factors cited as restraining hiring plans were a desire to keep operating costs low followed by the lack of available qualified workers.

Contacts in most sectors reported modest wage growth and expectations were for moderate wage growth in the coming months. Additionally, the majority of District contacts noted rising wages for both new and existing employees.

Manufacturing and Other Business Activity

Manufacturing activity expanded at a strong pace in October and early November, and the majority of other business contacts reported moderate to strong sales increases. Manufacturers reported sustained growth in production, particularly for metals, plastics, and electronics products. ... Manufacturers' capital spending plans rose moderately, and firms' expectations for future activity remained favorable.

Outside of manufacturing, transportation firms reported strong sales increases, while professional, high-tech, and wholesale trade contacts indicated more moderate growth. All firms expected a strong improvement in sales in the next six months. Professional, high-tech, and wholesale trade firms reported modest growth in capital spending plans, while transportation firms anticipated a moderate decrease in capital expenditures heading forward.

Eleventh District  --  Dallas (LA, NM & TX)  return to District list

The Eleventh District economy continued to expand at a moderate pace over the past six weeks. Manufacturing output strengthened, and activity in nonfinancial services increased. ... Employment, wages and prices continued to increase, and widespread reports of a tight labor market persisted. Outlooks remained positive overall, and generally a bit more optimistic than in the prior reporting period.

Employment and Wages

Overall employment growth remained solid, and upward wage pressure persisted at slightly elevated levels. Hiring picked up in the service sector, continued at about the same robust pace in manufacturing, and abated slightly in the energy sector. Labor market tightness carried on in most industries. Worker shortages were reported throughout the oil and gas supply chain and in construction, with contacts saying the scarcity of labor was driving up wages for certain types of workers. Similar reports came from manufacturing (particularly high-tech), airlines, and health care. Some banks reported that labor was becoming a bigger issue than regulatory compliance. Looking ahead, roughly two-thirds of contacts expect to increase employment over the next twelve months, largely citing an expectation of high sales growth as the impetus. Several firms said that the inability to find workers with the required skills was the main restraint for hiring plans.



There was further pickup in the robust expansion in the manufacturing sector. A rebound in output growth for nondurable goods was seen in October, driven largely by chemical and food production. Strength continued in durable goods manufacturing, led by increases in transportation equipment production. ...


Nonfinancial Services


Demand for nonfinancial services continued to expand moderately over the past six weeks. There were scattered reports of lingering effects from Hurricane Harvey, but for the most part business had returned to normal. ... Staffing services firms noted increased demand and broad-based strength. In North Texas, logistics, manufacturing, health care, call centers, and IT exhibited particularly strong demand for placements. ... Some contacts noted that uncertainty surrounding federal tax reform, health care, and government regulation was making it difficult to plan for 2018.


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 October through mid-November. Overall price inflation was flat. Conditions in the labor market tightened further, and upward wage pressures intensified. ... Conditions in the manufacturing sector remained solid, and activity in the agriculture sector was flat. ...

Employment and Wages

Conditions in the labor market tightened further, and upward wage pressures intensified. Shortages of skilled IT professionals in the technology, financial services, and manufacturing industries further intensified upward wage pressures. Wages in the construction industry climbed higher as post-hurricane rebuilding efforts in the Southeast worsened existing labor shortages. Contacts in the Mountain West observed very low unemployment levels in nearly every industry. Producers of manufactured pharmaceuticals reported intensified competition for new hires, increasing wage pressures notably. ...




Conditions in the manufacturing sector remained solid. Demand for semiconductors continued to be strong. Production of steel and manufactured metals picked up further, and rebuilding efforts in the Southeast are expected to buoy normally soft year-end sales. However, capacity utilization rates in the steel sector remained below long-run levels. Deliveries of commercial aircraft reached peak levels, but new orders slowed somewhat. Production of manufactured pharmaceuticals slowed somewhat from its pace over the first half of the year.



2017, Bruce Steinberg.  All rights reserved.

last updated November 29, 2017