Labor markets remained tight across the US, and employee compensation grew at a “modest-to-moderate” pace, according to the Federal Reserve Beige Book report released Wednesday. One staffing executive at a Minnesota firm called the labor market the “toughest market I have ever seen,” and the Atlanta Federal Reserve noted some employers are loosening standards in order to hire and retain workers.

The report, which looks at overall economic activity in the US, reported worker shortages were especially pronounced in construction, IT and healthcare.

Among comments from staffing firms and employers in the report:

• The New York Federal Reserve District reported one staffing firm said demand for temporary workers diminished as companies are increasingly interested in hiring workers directly. And some employers, not just staffing firms, reported difficulties securing H-1B visas.
• The Cleveland District also reported “staffing firms placed more permanent employees than in the prior period.”
• Staffing firms reported new client orders kept pace or resumed a pace consistent with a moderate labor market, according to the Philadelphia District. But lack of qualified, interested applicants constrained fulfillment to a modest pace.
• “Some employers noted relaxed policies or standards to hire and retain workers,” according to Atlanta Federal Reserve.
• A poll of staffing firms, most of them in Minneapolis-St. Paul, found that total job orders and clients have risen modestly year-over-year during the past two months, according to the Minneapolis Federal Reserve. The poll also found staffing firms had slightly higher expectations for job orders over the remainder of the summer. However, larger employment gains were restrained by low labor supply. “Unfilled job orders have risen modestly among staffing firms, and many said labor market tightness was getting worse,” according to the Minneapolis Federal Reserve. “‘Toughest market I have ever seen,’ said one.” Minnesota staffing firms also reported stronger wage growth, with almost half reporting 12-month wage growth of 5% or more. But expectations of future wage increases were “somewhat lower.”

Overall, economic activity expanded at a modest pace from mid-May through early July, little changed from the previous report.

To download the full report, click here.