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Beige Book: Modest growth in labor markets

March 03, 2016

Labor market conditions continued to improve, with modest growth in the labor market from early January to late February, according to the Federal Reserve’s Beige Book report released Wednesday.

The Beige Book, a collection of observations from the 12 federal regional banks, provides a snapshot of current economic conditions.

Demand for staffing services moved generally higher, with staffing services contacts reporting increased activity in Boston, New York, Philadelphia and Cleveland. However, the Chicago and Dallas districts reported demand for staffing firms was flat, with noted weakness in the Houston area due to the effects of low oil prices.

Observations include:

Boston: Staffing contacts report continued strength in the New England region, with year-over-year revenue growth ranging from about 10% to 60%; weather-related revenue hits in January and February of last year partially explain the size of these year-over-year increases. Labor demand continues to expand in recent months, particularly in the IT, specialty manufacturing, web service, legal, welding and healthcare sectors. Labor supply remains limited.

Philadelphia: Reports from staffing firms were mixed, ranging from continued strong growth to some slowing during the period, so that on balance activity may have returned to a moderate pace of growth. One staffing agency noted an increase in its direct hires and in conversions of their temporary placements to permanent positions, indicating that this bodes well for the economy, if not its firm.

Cleveland: Staffing firms reported an increase in the number of job openings and placements, primarily in healthcare and manufacturing.

Richmond: A staffing agent in Maryland said demand was greatest for high-skill positions and that there were not enough of those workers available. He added that as the unemployment rate continued to decline, it was becoming more difficult to find entry-level workers as well. Some uncertainty about the future of the economy was cited for driving up the increase in demand for temporary workers. In addition, extended warm weather at winter resorts delayed start dates of previously interviewed entry-level workers who had been offered work and as a result, many of those workers were not available when they became needed.

Chicago: Staffing firms again reported flat growth in billable hours and difficulty filling orders at the wages employers are willing to pay.

Dallas: Staffing services firms mentioned pressure from clients to reduce prices and fees. Staffing services firms said demand was flat to down, with contacts noting that weakness was concentrated in Houston and that the effects of sharply lower oil prices continued to spread into energy-related services and manufacturing.