Hot on the heels of the news that Apple will create some 20,000 jobs in the US over the next 5 years, came the latest Beige Book report from the Federal Reserve, according to which it’s not jobs that are missing in the US, it’s qualified employees.
As it usually does, the Beige Book – which collects data from the 12 Federal Reserve Districts – found that the economy continued to expand from late November, with the various Fed districts reporting “modest to moderate” gains while Dallas was the sole outlier, recording a “robust increase.” it also said that most districts reported “modest to moderate price growth since the last report; exceptions were Chicago, which noted that prices increased only slightly while San Francisco noted price inflation was down slightly.” There were also reports of rising home prices across most of the country.
The Beige Book said that the outlook for 2018 remains optimistic “for a majority of contacts across the country” and that some retailers highlighted that holiday sales were higher than expected. Meanwhile, most manufacturers reported modest growth in overall business conditions.
To be sure, the one thing the Beige Book has been closely watched for in recent quarter, are its observations on the state of labor market, and here it once again reiterated that most districts cited on-going labor market tightness and challenges finding qualified workers across skills and sectors, which, in some instances, was described as constraining growth.
Curiously, despite the pervasive inability to find skilled workers, most districts said that wages increased only at a modest pace. Perhaps if employers are so short staffed, they would consider rising wages?
And while the Beige Book noted that only a few Districts observed that firms were raising wages in a broader range of industries and positions, some districts reported that firms expect wages to increase in the months ahead.
Below are some of the most notable anecdotes from the various regional Feds, courtesy of Bloomberg:
- Boston: An industrial firm had 20 unfilled openings in a plant with 100 employees and said they were making up for it with significant overtime; An industrial-firm contact said that when a worker leaves, they typically end up paying the replacement 10 percent more than the departing worker
- New York: An employment agency contact noted that recent New York City legislation restricting employers from asking about job candidates’ salary histories may boost salary offers overall
- Philadelphia: On balance, wage growth held steady at a modest pace, although the percentage of non-manufacturing firms reporting increases slipped below 40 percent.
- Cleveland: A professional services contact reported boosting wages for select low-skills jobs by up to 20 percent, while a fast food executive said that wages at her restaurants are now up to $11 per hour. Higher labor costs were difficult to pass through to customers because of competitive markets; A fast food chain observed that the average revenue per transaction from recently installed self-service kiosks was higher than transactions generated by cashiers
- Richmond: Trucking companies expressed concerns that the newly mandated use of electronic logs could lead to an even greater shortage of drivers and lead to more mergers and acquisitions in the trucking industry
- Atlanta: To find and retain workers, firms continued to broaden their geographical search for candidates and develop or expand training programs
- Chicago: Almost all contacts thought that the Federal tax bill would have a positive impact on their firms. Most respondents expected to spread the tax savings across outlays for capital, labor, debt repayment, and profit distributions to owners
- St. Louis: A contact in Louisville reported increasing starting salaries multiple times a year to attract new hires, as well as increasing wages to retain skilled employees in information technology
- Minneapolis: A transportation union in Minneapolis-St. Paul agreed to a three-year contract with annual 2.5 percent increases
- Kansas City: Abundant supply continues to weigh on natural gas prices, but several respondents stated that increasing LNG exports could help push up prices; Energy sector respondents expected spending in all categories to increase in 2018, with the largest increases for exploration and development capital spending
- Dallas: Homebuilders generally did not report concern about the changes in the mortgage interest and property tax deductions in the new tax bill, but they did note ongoing pushback from buyers on new home pricing;
- San Francisco: Contacts reported increasing deflationary pressures for generic drug prices partly due to a rise in FDA drug approvals; Animal boarding and health service activity increased as pet owners traveled over the holiday season
All of the above, of course, is strange considering the US has nearly 100 million work eligible people currently not in the labor force. Maybe if US employers are truly so short of workers, they will consider – gasp – raising wages to attract talented employees…