In its just-issued “Beige Book” report on the economic condition of the country, the Fed says that in more than half the districts, which carve the nation into 12 financial geographies, it’s seeing “modest gains in hiring.” However even in these areas, the Fed got mixed signals from the employers and staffing firms it contacts for insights on economic conditions.
For example in the Chicago district, covering the states of Illinois, Indiana, Iowa, Michigan, and Wisconsin, the fed said “a number of firms were putting hiring on hold and had delayed temp-to-perm conversion decisions until next year.” In Richmond, the Fed found the employment market less positive than it did when it published its last report on October 10.
The one common thread running through each District’s report on its employment market is a reference to the shortage of skilled labor. While different skills are at issue, depending on the District, almost every one says employers and staffing firms mention shortages.
The Atlanta Fed says some of its agricultural contacts mentioned a shortage of workers in that industry; the Kansas City District mentioned a shortage of truck drivers; and in Dallas, truck drivers and energy workers are hard to find.
The so-called Beige Book is a compilation of anecdotal reports from companies of all types, as well as temp and contract labor firms and employment agencies. Unlike the U.S. Bureau of Labor Statistics monthly employment report, the Federal Reserve doesn’t tabulate specific data, relying instead on the observations of hundreds of contacts across the country. These are compiled into a report, which is issued eight times a year.
The report issued Wednesday said economic activity “expanded at a measured pace” in the weeks since the last report. The Boston, New York, and Philadelphia districts had weaker growth, with New York’s attributed mostly to Hurricane Sandy. Boston, which covers all of New England, experienced a slight slowdown, with its strong IT industry reporting “weaker-than-expected activity through October, with revenues in the third quarter roughly on par with year-earlier levels.”
The full report is available here. Below are excerpts from each district’s report concerning employment, labor supply, and wages.
Modest improvements in hiring activity were reported by most Districts. Labor markets were generally described as improving modestly by Boston, Atlanta, Chicago, Minneapolis, and Dallas. Staffing firms, according to Boston and Cleveland, experienced improved business conditions. However, Richmond reported that labor markets in general were weaker than in the last report, citing examples of soft demand and an unwillingness of some manufacturers to hire long-term unemployed workers.
Contacts for Boston noted that demand for office and clerical assistants and accountants remained weak, and Cleveland reported that hiring across industries was generally sluggish except in autos. Atlanta indicated that employment agencies were seeing a pickup in orders for temporary help. Some large employers, however, announced plans to move toward hiring more part-time, rather than full-time, employees.
Chicago reported that a number of firms were putting hiring on hold and had delayed temp-to-perm conversion decisions until next year. With respect to the upcoming holiday season, Cleveland reported that retailers were planning to hire the same number of temporary workers as last year, while Boston and Atlanta noted that some retailers were expecting to hire more help over the holidays. Finally, contacts in a number of Districts reported difficulties finding qualified workers in some specialized occupations.
Wage pressures were generally characterized as “subdued” or “contained” throughout much of the nation, according to the latest District reports. Virtually every District described wage growth as modest at best. Contacts in the Atlanta District attributed flatness in wages to the large number of applicants for newly posted positions. Richmond reported that manufacturing and retail wage growth edged up, but wage growth slowed at non-retail firms. In addition, non-labor costs were increasing in the Chicago District, mostly due to health-care costs.
St. Louis cited stable wages but added that non-labor costs in manufacturing were rising. Minneapolis noted pockets of stronger wage growth in some geographical areas, such as North Dakota where oil drilling was pushing up demand for workers. However, even this pressure was easing in recent weeks. Kansas City noted strengthening in wage growth among specialized positions in transportation and high-tech firms. Finally, San Francisco noted that limited hiring and abundant labor supply were holding down wage and compensation increases. However, San Francisco added that a few cases of wage pressures were occurring among truck drivers, health-care workers, and entry level positions in areas with low unemployment.
1st District – Boston
We continue to hear occasional complaints of difficulty finding qualified workers. A pharmaceutical manufacturer reports hiring 75 new people this year but still having 58 openings which they have been trying to fill “for a long time” and which “they do not anticipate to be able to fill this year…” They attribute the difficulty to their need for “highly qualified scientists with specific sets of skills.” A manufacturer of analytical laboratory equipment finds it “increasingly difficult to find qualified people in China.”
New England staffing firms generally report improved business conditions, with most describing business since Labor Day as “pretty good.” Year-over-year revenue changes in the third quarter varied widely, from down slightly to up by about 20 percent. Labor demand is up slightly in the IT and engineering sectors, and one contact reports renewed activity in the manufacturing sector. However, demand for office and clerical assistants and accountants remains weak.
In terms of labor supply, candidates with high-end skill sets such as nurses, mechanical and electric engineers, and software developers remain hard to find. In addition, one contact reports that turnover has recently decreased, as those with jobs are hunkering down for the holiday season. Nevertheless, bill rates and pay rates have gone largely unchanged since August. The outlook among New England staffing contacts is generally consistent with that of three months ago, with most expecting more robust growth in 2013.
2nd District – New York
Labor market conditions have weakened, probably temporarily, in the aftermath of Sandy. A major New York City employment agency specializing in office jobs reports a sharp drop-off in business after the storm, because many firms either shut down or operated without key personnel. Separately, a growing number of manufacturing contacts–not only in the New York City area but also in upstate New York–report declines in employment at their firms. However, businesses in other sectors report little or no change in employment. Contacts in both manufacturing and other sectors expect headcounts to remain steady, on net, over the next six months.
3rd District – Philadelphia
Most District staffing firms reported an ongoing slowdown in activity, although a few business lines associated with warehousing and distribution in advance of the pending holiday season were the strongest in over a decade. Staffing firms tended to suffer disproportionately greater revenue losses as their contract workers were unable to log hours when the storm impacts shuttered their offices. With the possibility of sequestration looming, many firms reported taking this time as an opportunity to restructure for efficiency (with potential layoffs), as many defense-related firms have already done or are in the process of doing.
Builders and contractors were beginning to grow concerned about labor shortages and rising wages, as general activity increased; Hurricane Sandy has escalated their concerns in New Jersey, as rebuilding begins to draw labor to storm-damaged areas.
4th District – Cleveland
Hiring was sluggish across industry sectors. Exceptions were found in the auto industry, where hiring continued at a more robust pace, and construction, where payrolls began to grow. Staffing-firm representatives said that the number of job openings has picked up slightly during the past six weeks. Vacancies were found primarily in manufacturing, information technology, and healthcare. Wage pressures are contained.
5th District – Richmond
Labor markets were more negative on balance than in our last report. Employment agencies reported somewhat stronger demand for temporary workers, but reiterated their difficulty finding qualified workers to fill open positions in manufacturing, aerospace, defense, automotive, and construction. A contact in South Carolina said that labor demand remained fairly soft, with the exception of some IT positions, noting that hiring came to a stop in the third quarter. A Charlotte area temp agency executive reported that manufacturers were unwilling to hire long-term unemployed workers because their skills may have diminished.
Manufacturers worried that taking on talent at reduced wages might lead to more turnover when the economy picks up. A North Carolina contact commented that college graduates who were unable to find full-time work were choosing to remain on unemployment rather than take part-time positions. According to contacts, retail wage growth picked up, while wages at non-retail services firms rose more slowly; manufacturing wage growth also edged up.
6th District – Atlanta
Employment conditions across the District continued to improve, albeit at a modest pace, in October. Auto- and energy-related firms reported additional hiring, as did some firms tied to residential construction. On the services side, accounting, and healthcare firms were the most positive. Employment agencies reported a pickup in orders for temporary help. Along those lines, some large employers announced plans to move toward hiring more part-time versus full-time employees.
Firms also reported that they continued to receive a large number of applications for most newly-posted positions, causing wages to remain flat. That said, we continued to hear reports of some higher skilled positions going unfilled because of a lack of qualified applicants.
7th District – Chicago
Labor market conditions improved slightly from the previous reporting period. Job growth in manufacturing slowed, but there was an increase in professional services employment. However, a number of firms noted that they have put hiring plans on hold and have delayed temp-to-perm conversion decisions until next year. Those that did report ongoing plans to hire continued to note difficulty in finding skilled workers, and many have created internal training programs as a result.
8th District – St. Louis
The majority of contacts reported that wages per employee and benefits per employee over the past three months have stayed the same relative to last year. Employment levels over the past three months showed signs of improvement; 38 percent of contacts reported increases in employment compared with the same period last year, while about half of contacts reported that their total employment has remained the same relative to last year.
9th District – Minneapolis
While labor markets continued to show signs of tightening in several areas, some layoff notices were reported. According to the aforementioned survey of building professionals, 31 percent expect to hire more workers during the upcoming year, compared with 18 percent in last year’s survey. Demand for nurses has picked up in western North Dakota. A representative of Montana State University noted that job prospects for graduates have improved.
Wage increases were moderate, with some exceptions noted. Reports of solid wage increases continued from the oil-drilling area of North Dakota, although the pace of growth has started to ease recently.
10th District – Kansas City
Several business contacts commented that uncertainty regarding political, economic, and tax policies was inhibiting growth, limiting business investment, and delaying hiring plans.
… fewer plant managers were hiring and the average work week declined. Trucking traffic picked up, due in part to emergency food shipments to areas affected by Hurricane Sandy. Several transportation firms reported an increase in capital spending and a shortage of qualified truck drivers.
11th District – Dallas
Employment held steady or increased at most responding firms. Accounting and legal firms reported hiring, and one staffing firm was adding to its payrolls despite a recent slowdown in demand for temporary workers. Shortages of truck drivers continued to be noted by transportation service firms and there were scattered shortages of workers at energy-related firms. Wage pressures remained subdued.
Staffing firms said demand “came to a sudden stop” over the past six weeks, as several clients delayed hiring until after the election. Declines were reported in orders from mid-sized manufacturing and construction firms. However, one contact noted steady demand for professional, technical, and information technology positions. Outlooks were mixed.
12th District – San Francisco
Upward wage pressures were modest overall. In most sectors, limited hiring activity and extensive worker availability held down recent and planned increases in wages and overall compensation, with reported numerical increases of 2 to 3 percent in general. Only a few cases of significant upward wage pressures were noted, including for truck drivers, health-care workers, and entry-level employees in a few geographic areas where unemployment rates have declined substantially.