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Beige Book: Stable labor market, modest employment growth

July 14, 2016

Labor market conditions remained stable from mid-May through the end of June, according to the Federal Reserve’s Beige Book report released Wednesday. Employment continued to grow modestly since the previous report and wage pressures remained modest to moderate.

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

Reports of employment growth ranged from little change in Cleveland to moderate growth in New York. Firms in the Dallas district reported varying degrees of changes in employment across sectors while contacts in Boston and Atlanta reported cautious hiring activities. Contacts in several districts reported strong demand for skilled labor, with challenges filling positions in fields such as IT, biotechnology and healthcare services.

Wage pressures remained modest to moderate in most districts, with the strongest pressures linked to skilled workers and difficult-to-fill positions.

The labor market has remained tight since the last report, and hiring activity has been fairly brisk for this time of the year. Manufacturers continue to report little change in staffing levels and do not expect much hiring in the months ahead. In contrast, service-sector businesses report moderately increasing employment and expect to ramp up staffing this year.

Observations by staffing firms include:

Philadelphia: Staffing firms reported continued moderate growth, including direct full-time placements, new temporary positions and conversions to permanent positions. Staffing contacts reported little change with relatively modest wage pressures and relatively few labor shortages.

Cleveland: Staffing firms noted an increase in the number of job openings, especially for temporary positions. However, job placements lagged openings.

Richmond, Va.: Throughout the district, employers and staffing agents reported increasing demand for workers at all skill levels. For example, a staffing agent in Maryland cited high demand for low-skilled warehouse and production workers, while an agent in North Carolina said high-skilled IT workers were in demand. Across the district, contacts reported difficulties finding workers in manufacturing, distribution centers, cyber security, biotech and professional services fields. A Maryland staffing service said most clients were increasing starting wages. Those who were not changing wages either could not fill the positions or were left with the least motivated and least skilled employees. Additionally, an executive in South Carolina stated that skilled workers could name their price. A staffing agent in North Carolina, on the other hand, said employers were only raising wages reactively to attract the best candidates.

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

Minneapolis: A staffing agency owner in Minneapolis-St. Paul said billable hours fell in May and early June over the same period a year earlier, but added, “We have a ton of open orders, but not nearly enough qualified and/or willing workers.”

Dallas: Excess capacity in the rail and airline industries exerted downward pressure on prices, and one staffing firm noted cutting margins for some clients, although others noted no change in rates. Staffing services firms said demand was mixed.