Employers Feeling Pressure to Pay More to Workers With Special Skills

Across the U.S., employers and the agencies that help them fill jobs are feeling increasing pressure to raise pay for workers with special skills.

Although hiring in many parts of the country and for certain sectors — manufacturing being one of the more frequently mentioned — was strong the last several weeks, growth nationally was generally minimal, the Federal Reserve said in a report on economic conditions released today.

The Fed’s so-called Beige Book summarizes reports from business and employment contacts in the 12 Federal Reserve districts to provide a ground level view of conditions.

Manufacturing activity is expanding

Generally, the Fed districts reported that between November and late December the pace of economic growth was “modest” or “moderate.” Consumer spending increased in most districts. Retail sales gains during the busy holiday shopping season were likewise described as “generally modest year-over-year.”

Manufacturing was a particularly bright spot. The Fed said that, “Manufacturing activity expanded in most districts.” Hiring by goods producers was strong in several parts of the country, although the Boston district, covering much of New England, was flat.

In the energy producing areas of the country, falling prices and strong supply curtailed hiring. There were reports of layoffs in the Dallas district, which mostly covers Texas.

How the Fed districts see wage/hiring issues

Here’s how the districts reported hiring and wage issues:

1st District – Boston: “With a few exceptions, manufacturers and retailers are not increasing employment, while advertising and consulting firms continue to add modestly to head counts.”
2nd District – New York: “The job market overall showed further signs of strengthening in December… ” Job candidates seem to be receiving multiple offers. Employment agency contacts noted increasing upward pressure on wages. Strong demand for workers in information technology, human resources, customer service and trucking.
3rd District – Philadelphia: Manufacturers expect positive growth in year ahead; a third of them expect to increase hiring. Staffing firms experienced moderate growth during the survey period and were “very positive for growth prospects in 2015.”
4th District – Cleveland: “Payrolls increased at a modest pace, primarily in banking, freight services, and manufacturing. Staffing firms reported that the number of job openings and placements in energy and manufacturing companies had risen slightly. Upward pressure on wages is limited to experienced and technically skilled personnel across industry sectors.”
5th District – Richmond: “Manufacturing employment grew at a slightly faster pace while average wage growth slowed somewhat. In the service sector, the rate of hiring moderated from the strong pace of a month earlier and wages generally rose modestly.” Labor demand, generally, rose led by hiring in the Carolinas where “new hiring focused in software, professional and business services, manufacturing, and hospitality. Modest increases in labor demand were reported in Maryland and West Virginia, mainly for cybersecurity experts in Maryland and for workers in manufacturing and natural gas in West Virginia.”
6th District – Atlanta: There were job gains across most sectors, the local Fed reported, with retail contributing strongly. “Reports of high turnover rates were more prevalent since the previous report, with many firms offering improved benefits, notably health care, as an employee retention device. In addition, the conversion of part-time workers to full-time accelerated as businesses tried to meet increased product demand and boost employee loyalty.”
7th District – Chicago: “There was ongoing strong demand for skilled workers, particularly for those in professional and technical occupations and skilled manufacturing and building trades. In addition, a staffing firm reported an increase in demand for its services from small- and medium-sized businesses.” “Wage pressures remained less pronounced for unskilled workers, but a staffing firm noted that it was working with clients to raise contract wages in an effort to reduce labor force turnover.”
8th District – St. Louis: Economic growth picked up over previous report. “Firms in chemicals, aviation, packaging, and light machinery plan to hire new employees and expand operations. In contrast, firms that manufacture furniture and paper reported plans to lay off workers or close facilities.”
9th District – Minneapolis: “Labor markets continued to tighten since the previous report. While overall wage increases remained modest, there were examples of steeper increases in some regions and industries.”
10th District – Kansas City: “Wage growth accelerated slightly, with many contacts citing labor shortages.” “Wages in the retail sector continued to increase during the holiday season, and transportation contacts noted higher wages due to difficulties acquiring CDL drivers. Nearly all contacts reported increased labor costs as a result of new health care regulations. Respondents noted a particular shortage in skilled machinists, engineers, IT developers, and a sustained shortage of truck drivers.”
11th District – Dallas: “Employment in most industries held steady, but there were some layoffs … Staffing firms, auto dealers, and cement, high-tech, and fabricated metals manufacturers reported increased payrolls … Construction contacts continued to report a tight labor market. Reports of rising wage pressures were less prevalent than in the previous report. Staffing services firms noted continued wage pressures, particularly for certain sectors and positions, although one firm said companies continued to resist wage increases. Upward wage pressure on semi-skilled positions in manufacturing eased, but contacts noted continued pressure for high-skilled labor mostly in high-tech and food manufacturing.”
12th District – San Francisco: “Economic activity continued to improve moderately… “Wages continued to increase at a modest pace during the reporting period. Several contacts reported that wages were flat or had increased at about the rate of price inflation in their area. Labor shortages boosted wages of truck drivers, aerospace engineers, and construction machinists and framers. Regarding total compensation, some contacts noted that increases in employee medical insurance premiums tended to offset any increases in wages and salaries.”