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Beige Book report outlines tight labor market

Beige Book report outlines tight labor market

NEW YORK — The Federal Reserve’s Beige Book report continues to highlight a tight labor market with most districts characterized growth as “modest.” It is a pace that is expected to continue amid a generally positive outlook across major segments of the economy, RBC Economics reported.

The Beige Book is a report outlining economic activity in each of the Federal Reserve districts. It is released just prior to Federal Reserve Open Market Committee meetings where talks occur about raising and lowering interest rates.

Today’s Beige Book report was based on comments collected between mid-May and the end of June, so it captures little of the period following the United Kingdom’s June 23 Brexit vote.

“To the limited extent that it was discussed, contacts seemed to see Brexit as increasing uncertainty or downside risks but likely having little direct effect on business,” said Economist Josh Nye.

Employment growth was “modest” during the reporting period, and there were reports of stronger demand for skilled labor. Wage pressures were “modest to moderate,” which was slightly stronger than previously stated.

While concentrated in higher-skilled positions, the pressure continued to spread to lower-level positions in some cases. Output prices were little changed, on balance, but most districts reported some upward pressure on input prices.

Consumer spending was “positive,” and while there were some signs of softening, the outlook was optimistic in most districts.

Retail sales were mixed as auto sales slowed although remained at high levels. Manufacturing activity was also “mixed”, and the generally positive outlook has deteriorated slightly, while non-financial services growth was “slight to modest” (a weaker assessment than previously).

Residential real estate activity continued to pick up, and commercial and leasing activity was stable to higher during the reporting period.

“Recent Beige Book reports, including today’s, have consistently pointed to tightening labor market conditions, lending support to Federal Open Market Committee  participants who see the recent slowdown in trend job growth as consistent with the economy nearing full employment,” said Nye.

“The steady albeit modest pace of activity reported should also assuage fears of a broader slowdown in the domestic economy,” he added. “The Fed, however, remains sensitive to global economic and financial developments, and while the financial market response to Brexit has thus far been benign, there is the potential for increased uncertainty and sporadic volatility as the UK begins to negotiate its exit from the EU.

“With today’s report showing that tighter labor market conditions and rising wages have yet to feed through to higher prices, we expect the Fed will remain patient as it assesses the ongoing effect of global developments,” said Nye.

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About Greg Gerber

Greg Gerber is a freelance writer and podcaster who has been writing about the RV industry since 2000. He is the former editor of RV Daily Report.

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