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Economic activity little changed; employment growth moderates: Beige Book

April 20, 2023

Economic activity in the US was little changed in recent weeks, according to the US Federal Reserve’s Beige Book report released Wednesday. Nine districts reported either no change or only a slight change in activity this period, while three indicated modest growth.

Expectations for future growth were mostly unchanged as well; however, two districts saw outlooks deteriorate.

The Beige Book also reported employment growth moderated somewhat this period as several districts reported a slower pace of growth than in recent Beige Book reports. Contacts reported the labor market becoming less tight as several districts noted increases to the labor supply. Additionally, firms benefited from better employee retention, which enabled them to hire for open roles while not constantly trying to backfill positions. Wages have shown some moderation but remain elevated.

Here are some select comments from the Beige Book on the labor outlook:

Boston district. Headcounts increased modestly on balance, led by strong labor demand in the district’s hospitality and tourism sectors, and wage growth was steady at a moderate pace. Contacts in manufacturing said that the labor market softened significantly, making for much easier hiring and helping to alleviate wage pressures some.

New York district. Businesses in the manufacturing, construction, and education and health sectors indicated that employment declined in recent weeks. Even so, contacts at two major employment agencies noted ongoing strong labor demand and continued to indicate that worries of widespread weakening in the labor market have not materialized.

Philadelphia district. Employment held steady following a modest rise in the prior period. Multiple contacts, including staffing firms, noted that hiring continued to be easier, with more applicants, lower turnover and less wage pressure.

Richmond district. Employment increased slightly in the most recent reporting period. A South Carolina staffing firm said that demand for engineering and skilled trades workers has been consistently high and doesn’t show signs of slowing.

St. Louis district. Although labor markets remain tight overall, reports of easing have increased since the previous report. A St. Louis staffing company, although still reporting hiring challenges and churn in the market, has seen these issues begin to relax compared with last year.

Minneapolis district. A monthly business conditions survey showed that overall hiring sentiment remained positive; staffing contacts also noted increases in job orders with the coming of spring. A Minnesota staffing firm said that businesses were “exfoliating the workers they don't need.” A Wisconsin workforce contact said that hiring had softened; there was not widespread downsizing, but more the “abandonment” of recruiting for unfilled positions. A Wisconsin staffing contact said the number of job applicants rose, “but the quality is not strong.” Still, job placements were growing because clients “are becoming more open to more questionable candidates.” A staffing firm reported that wages for industrial positions had risen more than 10% over the past year, and additional increases were expected.

Dallas district. Staffing firms noted clients were taking longer to make hiring decisions in part due to the increased economic uncertainty, and there were scattered reports of layoffs in construction-related manufacturing and upstream energy. Demand for staffing services was mixed, with firms making white-collar placements seeing continued strong activity while those filling blue-collar positions citing weakness.

This Beige Book report was based on information collected on or before April 10.