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Beige Book: Staffing firms report strong demand, tight supply

March 02, 2017

Labor markets remained tight in early 2017 with some districts noting widening labor shortages, according to the Federal Reserve’s Beige Book report released Wednesday. Employment grew moderately in most of the nation, although three districts characterized growth as modest and two reported that it was little changed.

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

All responding staffing firms observed strong overall labor demand and tight labor supply. Staffing firms in a number of districts saw brisk business for this time of year and one noted more conversions from temporary to permanent workers. Two firms mentioned lower demand from the manufacturing sector while the IT, accounting and healthcare sectors had particularly low labor supply.

In general, wages rose modestly or moderately in most districts with a few reporting some pickup in the pace of wage growth. A number of districts noted that shortages of skilled workers — particularly engineers and IT workers — were driving up their wages, and there were also some reports of labor shortages in the leisure and hospitality, construction and manufacturing industries.

Observations by staffing firms include:

Boston: New England staffing services contacts reported mixed changes in year-over-year revenue but most saw slight year-over-year declines in revenue, attributable in part to a tight labor supply. Staffing firms indicated bill and pay rates had increased since the previous quarter and most reported little pushback to increasing bill rates. All responding staffing firms observed strong overall labor demand and tight labor supply. Two firms mentioned lower demand from the manufacturing sector; sectors with particularly low labor supply were IT, accounting and healthcare. While all firms expressed optimism about the next few months, several were concerned about policy uncertainty with the new administration. One healthcare staffing firm, for example, lost a substantial number of listings a few weeks ago when one of its clients issued a hiring freeze in Boston, waiting to see what happens with the Affordable Care Act.

New York: Contacts at employment agencies reported that the labor market has remained tight and hiring activity has been fairly brisk for this time of year. One contact in upstate New York noted a recent pickup in hiring at manufacturing and tech firms, while an agency in New York City reported brisk hiring from small to midsize financial firms. Contacts at major employment agencies across the district report starting salary offers have generally been steady to rising modestly, though they have risen more noticeably for some high-skill workers that are in short supply.

Philadelphia: Staffing firms described themselves as busy. In some cases, activity picked up immediately following the holiday lull and continued at a steady pace. Staffing contacts noted little change in overall wage pressures.

Richmond: Staffing firms reported the volume of worker conversion from temporary to permanent increased modestly.

Chicago: A staffing firm again reported little change in billable hours and ongoing difficulty filling orders at the wages employers were willing to pay.

Minneapolis: A staffing agency in southern Minnesota said client calls and overall business were increasing while another in Minneapolis-St. Paul said job orders were flat in January but that clients expected activity to pick up. The owner of a southern Minnesota staffing agency expected manufacturing wages in the region to grow 8% to 10% in the coming year: “There’s a huge demand and low supply. Wages need to match in order to supply workforce.”

Dallas: Most staffing services firms saw a pickup in demand. Staffing demand remained particularly strong in Dallas, with a surge in IT, and rose slightly in Houston, including in the oil and gas sector.