The Federal Reserve says persisting labor and supply shortages and inflationary concerns are clouding otherwise improving business conditions in Minneapolis, Chicago, Cleveland, Kansas City and St. Louis markets.
The Federal Reserve Bank of Minneapolis reported in the Beige Book, released Wednesday, that hiring demand was healthy across all sectors — especially retail, hospitality, manufacturing, construction, transportation and health care. Despite growth, however, further gains were constrained by labor availability. To combat growing wage pressures, a growing share of employers were raising wages by 3 percent or more. Numerous contacts also reported offering additional incentives, including hiring and retention bonuses and tuition reimbursement.
However, the labor supply in the Ninth District increased since the last report in early June, as unemployment insurance claims continued declining across all district states. Staffing and workforce contacts in states that ended pandemic-era unemployment programs reported that the number of job seekers in the labor market increased, but not as much as expected. A recent survey showed that low pay at available jobs and concerns over COVID-19 exposure were the top challenges keeping some from accepting employment.
In response to the labor shortages, the Federal Reserve Bank of Kansas City reported that, with many seeing demand for all positions and others noting a particular need for technicians and hourly labor, half of service contacts and two-thirds of manufacturing contacts reported investing in labor-saving automation strategies, with about one-third indicating a faster pace of investment than in the past.
Real estate and construction reportedly remained strong throughout the regions but was limited in most districts by continued high building materials costs.
The U.S. unemployment rate was measured at 5.9 percent in June. The Consumer Price Index increased 0.9 percent in June on a seasonally adjusted basis, the largest one-month change since June 2008 when the index rose 1 percent. Over the past 12 months, the 5.4 percent CPI increase is the largest since the same figure was noted in a 12-month span ending August 2008.
Federal Reserve Bank of Chicago
Economic activity moderately increased, but growth was limited by supply constraints. The Chicago Fed reported employment increased strongly, business spending increased moderately, manufacturing increased modestly and consumer spending and construction and real estate were flat. Wages rose moderately while prices increased strongly. Financial conditions improved strongly. Prospects for agriculture income in 2021 did not change much.
Federal Reserve Bank of Cleveland
The Fourth District continued expanding at a solid pace in recent weeks, though supply side constraints limited the ability of many firms to keep up with growing demand. Nearly half of contacts indicated they had increased staffing during the prior two months, with a nearly equal share reporting unchanged staffing levels. Many of the ones with unchanged levels said they could not find workers to fill new or open positions.
Overall, household spending increased as progress in the fight against Covid-19 led many consumers to pursue activities they had not done for more than a year, such as dining out and traveling. However, residential real estate agents and auto dealers reported that while demand remained strong, sales were limited because depleted inventories left potential buyers with fewer purchasing options.
Federal Reserve Bank of Kansas City
Economic activity expanded moderately in June, and further gains were expected over the next few months. Consumer spending increased moderately, with robust gains in retail sales and a moderate pick up in restaurant and tourism activity. Contacts in most other sectors reported stronger demand and increased activity levels. Wage growth accelerated as labor shortages persisted, and both input and selling prices rose robustly.
Federal Reserve Bank of Minneapolis
Economic activity and employment grew at a strong pace since mid-May, with strong hiring demand outpacing improved labor availability. Wage pressures were strong, with wholesale price pressure remaining higher than those for consumer prices. The Federal Reserve found that growth was noted in consumer spending, construction, real estate, manufacturing, agriculture and energy. Minority- and women-owned businesses reported moderate improvements in business activity. Employment saw moderate-to-strong growth since the last report. Two separate employer surveys have shown labor demand continually increasing in recent weeks.
Consumer spending was moderately higher since the last report and remained high overall. Hospitality and tourism firms reported improving activity in recent weeks, commercial construction grew slightly.
Federal Reserve Bank of St. Louis
Economic conditions continued improving at a moderate pace since the previous report. Contacts continued reporting that labor and material shortages were restraining their ability to meet customer demand. Overall inflation pressures remained elevated, but firms reported carrying degrees of pass-thru to customers.