Labor markets remained tight, but wage increases were modest despite firms saying difficulty in hiring workers has constrained expansion, according to the US Federal Reserve’s Beige Book report released yesterday. It covers the US economy from late November through the end of the year.

“Only one manufacturing contact reported significant increases in employment and many said labor markets were very tight,” according to a summary of the report. “One manufacturer was three months behind schedule in trying to hire workers for a new plant. Another industrial firm had 20 unfilled openings in a plant with 100 employees and said they were making up for it with significant overtime. When asked why they didn’t increase wages to fill the openings, the contact said they would have to pay all the existing workers more which would be uneconomic.”

Another industrial firm said when a worker leaves, the company typically ends up paying the replacement 10% more.

The Beige Book also noted that software and IT services firms have kept headcount close to flat in recent months, but they plan to increase staff by up to 10% over the year. These firms also noted shortages for technical roles, such as engineers, were getting worse.

Overall, the US economy expanded from late November through the end of the year, according to the Beige Book. Eleven of the 12 districts reported modest to moderate gains with only Dallas posting a robust increase.