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Staffing services increase, workers harder to find — Beige Book

October 16, 2014

Staffing services increased in many reporting Federal Reserve districts, according to the Federal Reserve’s Beige Book report released Wednesday. However, most districts had some employers reporting difficulty finding qualified workers for certain positions.

Staffing services increased in New York, Philadelphia, Cleveland, Richmond, Chicago and Dallas. Philadelphia indicated staffing requests increased for both temporary and permanent positions, while a staffing firm in the Chicago district reported strong orders but noted improving labor market conditions resulted in increased difficulties in finding qualified workers.

The Boston district reported generally higher demand for consulting and advertising services. In Philadelphia, more than three-fourths of all service-sector contacts expected continued positive growth trends over the next six months. Technology firms and engineering companies in Richmond noted stronger revenue growth; Dallas indicated that demand for accounting services rose further from an already-high level; and both Dallas and San Francisco noted that demand for legal services picked up in some areas.

Some staffing highlights include:

Boston: Firms are not generally hiring, on net, but those with substantial increases in business — one manufacturer and several in consulting and advertising — are raising their headcounts.

New York: The labor market showed further signs of strengthening. One major New York City employment agency noted brisk hiring activity and characterized labor demand as increasingly robust — particularly for temps, workers with people skills, and especially IT workers. A contact at another employment agency has not seen the normal seasonal slowdown in recent weeks and characterized the labor market as fairly good, with particularly brisk demand for HR people.

Philadelphia: Staffing companies reported notable growth and further increases in staffing requests. Staffing contacts in eastern and central Pennsylvania reported moderate increases in hiring for temporary and permanent positions. Staffing requests came from a variety of sectors and for business expansions, as well as replacements. Staffing firms remained very upbeat about prospects for this year and next. Although hiring remains generally cautious, staffing firms continued to note some increased hiring for expansion. Staffing contacts also reported a few leading signs of wage pressure: A few job prospects have turned down offers, some companies are making counter-offers to retain employees, and clients are generally less rigid about salary levels.

Cleveland: Staffing firms reported that the number of job openings has picked up, while placements fell. Several recruiters reported on a trend to replace permanent, lower-skilled employees with temporary workers. Due to perceived shortages in selected labor skill areas, upward pressure on wages is beginning to be felt by general building contractors and freight haulers.

Richmond: A central Virginia staffing agent noticed significantly stronger demand in recent weeks, especially for customer service, healthcare and legal workers. A Maryland employment service provider said there were no notable changes in hiring, but suggested that the most in-demand skills were for managers, supervisors, engineers and IT professionals. Some transportation, banking and finance, hospitality, and retail industries continued to have difficulty finding workers. A few contacts reported wage pressures for drivers, construction workers, skilled engineers, managers, IT professionals and bankers.

Atlanta: With a few exceptions, contacts reported their staffing levels were increasing slowly. Businesses across the region continued to report difficulty finding qualified workers. Similar to the previous report, hiring challenges appeared to be both intensifying and broadening across the skill and occupation spectrums.

Chicago: Retailers plan to hire slightly more holiday workers than last year. Demand remained strong for skilled workers, particularly for those in professional and technical occupations and skilled manufacturing and building trades. Contacts again mentioned expanding internal training programs to address worker shortages and an increased willingness to pay higher wages. A staffing firm reported strong order books, but noted that improving labor market conditions in the district were leading to increased difficulties finding qualified workers.

St. Louis: Several manufacturing firms reported plans to add workers, expand operations or open new facilities, while a smaller number reported plans to reduce employment. Producers of construction materials, tools, consumer goods, and aviation equipment announced plans to hire new employees. Reports of plans in the district’s service sector have also been positive since the previous report, with firms in freight, insurance and financial, and communications services reporting new hiring and expansion plans. A contact in Louisville noted increased turnover of skilled employees who are switching to higher-paying jobs.

Minneapolis: Labor markets continued to show signs of tightening since the previous report. In Minnesota, a firm is hiring 1,000 seasonal workers to fill a variety of positions, a medical device manufacturer announced plans to add over 200 jobs, a window manufacturer will add 100 jobs, and a heating and air conditioning plant announced plans to add 95 jobs over the next three years. According to a survey of Minnesota businesses by an employment services firm, 19 percent of respondents expect to hire more employees during the fourth quarter, while 6 percent expect decreases in staffing. In last year’s survey, 17 percent expected staffing increases, while 7 percent expected decreases

Kansas City: Increased wage pressures were noted in a few industries, particularly manufacturing, restaurants, transportation and energy. Some contacts continued to report a short supply of workers, particularly for drivers, construction and skilled manufacturing positions.

Dallas: Employment at responding firms held steady or increased, and labor market tightness continued to be mentioned by numerous contacts. Reports of hiring came from staffing and transportation services firms and construction-related manufacturers such as fabricated metal, cement, and brick producers. Staffing services firms said candidates were often receiving multiple offers, which caused some firms to increase wages to stay competitive. Staffing firms generally noted demand increases, with one contact saying the past two weeks were the company’s strongest all year. Contacts said all skill levels were in high demand, and that demand for low-skilled workers had increased. Direct hiring led demand growth, although one contact said contract and temporary worker demand will likely increase as the Affordable Care Act’s effects continue to be felt.

San Francisco: Demand for business and consumer services increased moderately. Demand for legal services picked up in some areas, in connection with rising real estate activity. Demand for advertising services declined, but businesses increased spending on cloud computing services. Contacts reported that industry leaders expect IT spending to accelerate in 2015, driven by spending on big data and security services, as well as on cloud computing.