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US labor market tight in November and December: Beige Book

January 17, 2019

Employment increased in most of the country in late November and December, according to the Federal Reserve’s Beige Book report released Wednesday. Labor markets remained tight and firms struggled to find workers at any skill level.

The Beige Book, a collection of observations from the 12 federal regional banks, provides a snapshot of current economic conditions.

The Federal Reserve Bank of Minneapolis indicated construction firms turned down business because they could not find workers, and the Federal Reserve Bank of Atlanta reported that a few contacts were either actively overstaffing or retaining employees through lulls in demand in anticipation of future growth. Wages grew throughout the country, with the majority of districts reporting moderate gains. Wages increased across skill levels, and numerous districts highlighted rising entry-level wages as firms sought to attract and retain workers and as new minimum wage laws came into effect.

Overall, reports suggest economic activity increased in most of the US, with eight of 12 Federal Reserve districts reporting modest to moderate growth. Outlooks generally remained positive, but many districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.

Observations by Federal Reserve District include:

Philadelphia: Staffing firms reported ongoing difficulty hiring and retaining workers, although one firm noted that orders had slowed a bit. One staffing firm noted that wage increases had slowed but that several clients would be evaluating starting wages in early 2019, so wage rate hikes were expected to pick back up in the first quarter.

Richmond, Va.: Some of the most hard-to-fill positions were electricians, hotel and restaurant workers, construction workers and managers, computer engineers, and cyber professionals. Meanwhile, a staffing agency reported a decrease in demand for temporary staffing services as more clients were hiring full-time workers instead.

Chicago: A staffing firm that primarily supplies manufacturers with production workers reported continued difficulty in filling orders and no change in billable hours.

Minneapolis: Among more than a dozen staffing firm contacts, mostly in Minneapolis-St. Paul, a small majority said job orders and total clients were higher in the fourth quarter compared with a year earlier. But tight labor supply was limiting job placements and hours booked among staffing firms, with unfilled job orders seeing a notable increase. Staffing firm contacts noted continued reluctance among some clients to raise wages enough to change hiring difficulties.

Dallas: Growth in the nonfinancial services sector slowed notably over the reporting period. The slowing was led by staffing services, where demand decelerated from very high levels and revenue declined for some firms. A few staffing contacts reported increased uncertainty and customers delaying hiring plans.

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