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Beige Book: Tight labor market, staffing firms report steady demand

October 20, 2016

Labor market conditions remained tight, with modest employment and wage growth noted over the reporting period from late August to early October, according to the Federal Reserve’s Beige Book report released Wednesday. Staffing services demand grew at about the same pace or improved slightly since the prior report.

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

Demand for staffing services strengthened in the New York and Dallas districts — particularly in the Dallas-Fort Worth metroplex — and continued to expand at a modest pace in the Philadelphia and Cleveland districts. A large employment agency in the New York district said hiring was brisk and broad-based, while a staffing firm in the Chicago district reported flat activity.

While reports of labor shortages varied across skill levels and industries, there were multiple mentions of difficulty hiring in manufacturing, hospitality, healthcare, truck transportation and sales. The Richmond, Dallas and San Francisco districts noted a lack of construction workers, with some contacts noting these shortages were constraining construction activity.

Employment expanded at a modest pace over the reporting period. Reports of hiring were strongest in the Richmond, Chicago, St. Louis and San Francisco districts.

Observations by staffing firms include:

New York: A major New York City employment agency reported hiring activity has remained brisk, with strong labor demand coming from a broad array of industry sectors. Most of the job openings, however, require some specific skill sets. The contact also noted that employers, faced with a shortage of skilled job candidates, are increasingly willing to negotiate on compensation.

Philadelphia: Staffing firms indicated modest increases in hiring. Reports from staffing firms continued to reflect modest growth, with a central Pennsylvania firm noting more activity in executive hiring.

Cleveland: Reports from staffing firms about job openings and placements were mixed, though all contacts noted an increase in the number of temporary positions.

Chicago: A staffing firm again reported no change in billable hours and ongoing difficulty filling orders at the wages employers were willing to pay. The firm noted that turnover rates were high. It also reported an increase in drug test failures relative to a year ago among potential employees.

Minneapolis: A Montana staffing firm reported job orders were lower compared with last year due to the loss of two large manufacturing accounts and difficulty finding workers for available jobs. A central Minnesota healthcare organization with about 500 employees reported that “there are 50 openings at all times.”

Dallas: Staffing services firms said demand strengthened, with some contacts seeing very large increases, especially in the Dallas-Fort Worth area. A few contacts noted a pickup in staffing demand in Houston.