Fed Says Demand for Staffing Services Increasing

Oct 16, 2014

Reports from the Federal Reserve say shortages of skilled workers in a variety of  trades are showing up here and there across the U.S., putting pressure on employers including staffing firms to raise wages.

In the latest edition of the “Beige Book,” the Fed said employment was growing at about the same rate it has for the last few months, a rate it previously described as “modest.” Staffing services, however, were particularly singled out as a growth area.

Said the Fed in the report out Wednesday, “Staffing services increased in many Districts, including New York, Philadelphia, Cleveland, Richmond, Chicago, and Dallas. Philadelphia indicated that staffing requests increased for both temporary and permanent positions.”

In particular, the Philadelphia District, covering east and central Pennsylvania and southern New Jersey and Delaware, reported, “The most notable change in (employment) growth was reported by staffing companies.” “Staffing firms remained very upbeat about prospects for this year and next,” the Philadelphia Fed reported.

Like their clients, staffing companies told the Fed they were having trouble finding the workers they needed. The Beige Book said a staffing official in the Chicago region “reported strong orders but noted that improving labor market conditions were leading to increased difficulties in finding qualified workers.”

Labor shortages are putting pressure on employers to raise wages for certain trades and professions. Employers are having to pay more to attract workers in construction and manufacturing in several parts of the country, the Fed noted. In parts of the Midwest, Mid  Atlantic region and the Northern Plains states, transportation workers are seeing somewhat higher pay. And in New York the number of workers quitting to take higher paying jobs is on the rise.

That shortages of some professionals exist is nothing new. Last week Dice reported that unemployment among tech professionals had fallen to an average 2.7% in the third quarter. And SHRM’s LINE Report for October said its measure of recruiting difficulty has been going up for seven months straight.

But the Fed’s October 15th “Beige Book” notes that “Most Districts reported that some employers had difficulty finding qualified workers for certain positions.” (The nation is divided into 12 federal reserve districts.)

The Fed says:

  • Manufacturers in New England have trouble finding machinists;
  • The lack of skilled construction workers has delayed projects in the area served by the Chicago district;
  • Delays have also occurred in petrochemical projects in Texas and parts of New Mexico and Louisiana because of a shortage of workers in heavy construction and engineering;
  • Truck drivers in short supply in several areas.

In the Philadelphia District, staffing firms are telling analysts that candidates are turning down offers and “clients are generally less rigid about salary levels.” Employers are also more often now making counteroffers.

In the Dallas District, the Fed there noted, ” Staffing services firms said candidates were often receiving multiple offers, which caused some firms to increase wages to stay competitive.”

The Beige Book is a compendium of reports from businesses and other sources about economic conditions. Wednesday’s Beige Book says there’s been no noticeable change in the pace of employment growth since the last report in September. That edition also noted little change since July when the Fed reported that employment growth had improved in all 12 districts.

Since the March report, which was the first this year to note upward wage pressure, there’s been a slow, but steady broadening in the number of regions reporting wage pressure. The types of jobs has also increased, though only slightly.

This wage pressure has yet to be evidenced in the monthly Labor Department reports. September’s report said wage increases nationally averaged 2%.

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