As the Fed’s Beige Book is just overloaded with a lot of tidbits, but exhausting to read, I always try to focus on one theme of it that I believe is most important. As for today’s release, I think there are two things most relevant, the direction of inflation and the breakdown between services and goods inflation and the other being the labor market with so many conflicting signals with hiring/firing and wages. On inflation, there are definite signs of easing but a stickiness still with many prices. On labor, the sense of slowdown is apparent but labor shortages and the need for more skilled labor is apparent in certain industries. The comments on wages were mixed with some easing in certain areas but rising for others.
Boston:
“Employment was up modestly, and wage growth was mixed. Labor markets remained tight but hiring and retention difficulties abated for some contacts and were stable, if still elevated, for most. Travel industry contacts engaged in a limited amount of hiring and their headcounts were roughly stable at desired levels. One retailer increased headcounts moderately in anticipation of a strong holiday season, and mostly reached their hiring targets. Manufacturers engaged in modest hiring on balance, but one instituted a hiring freeze in anticipation of a 2023 recession. Among software and IT services contacts headcounts increased moderately, and all but one contact experienced decreased turnover (another saw higher attrition).”
“The hiring outlook was mixed, and some contacts expressed concerns about adding too many workers in the lead-up to a possible downturn.”
“Hospitality industry contacts reported average wage increases of 15 percent from a year earlier, with most of the growth occurring in recent months. Software and IT firms held wages steady or offered selected wage increases and bonuses, rather than permanent raises for all. A clothing retailer paused wage increases, having implemented substantial raises earlier in the year, but expects to offer signing bonuses to attract more seasonal hires. Manufacturing wage growth ranged from flat to above average.”
“Most contacts expected to hold prices firm moving forward based on having made significant price hikes earlier in 2022, but a select few said that their prices still lagged relative to their costs and planned to make at least modest increases in the coming months.”
NY:
“Employment continued to increase modestly, with some signs that labor shortages have eased a bit.”
“Leisure & hospitality firms reported a marked pickup in hiring, and businesses in wholesale trade, information, and professional & business services reported that they continued to hire, on net. Firms in almost all industry sectors plan to add staff in the months ahead.”
“Contacts in the construction, transportation, and information industries reported some slowing in wage growth, as did employment agencies in both upstate and downstate New York. In the education & health and leisure & hospitality sectors, however, wage growth remains strong. Businesses across all sectors continue to project widespread wage hikes in the months ahead.”
“Selling price increases have slowed noticeably in the manufacturing sector but not in the service sector. A sizable and steady share of businesses in both sectors said they plan to raise prices in the months ahead.”
Philly:
“Employment continued to grow slightly. Contacts described a heightened expectation of a recession, and businesses intensified preparations for a downturn: Multiple firms instituted a hiring freeze, others initiated planning for layoffs if business conditions did not improve, and one firm noted broad-based layoffs were already under way. While the share of firms reporting employment increases declined for the second consecutive period, the share remained near 25 percent for nonmanufacturing firms and near 15 percent for manufacturing firms.”
“Most firms – 90 percent of manufacturing and 83 percent of nonmanufacturing – reported labor supply as constraining business operations to some extent in the third quarter of 2022. Several contacts noted firms were hesitant to lay off employees, given the difficulty they have experienced hiring workers in recent years.”
“Firms continued to note that wage growth subsided in recent months… However, wage inflation remains widespread and appears to have maintained a moderate pace.”
“On balance, prices rose moderately over the period – slower than in the prior period. Several contacts noted the rate of price increases had relented. However, price growth remained widespread.”
Cleveland:
“Employment continued to increase, albeit at a slower pace. Slower employment growth in recent cycles is mostly a function of fewer firms adding to their staffing levels and more holding steady.”
“One logistics contact said, “We would normally be hiring more people at this time but economic uncertainty has put our expansion plans on hold.”
“Wage pressures remained elevated… Contacts indicated that wage increases remained necessary to retain talent amid a shallow pool of labor, which one described as “more of a puddle than a pool.” Several contacts said that labor markets are still tight and likely to remain so, keeping upward pressure on wages for the near future.”
“Cost pressures remained high, though they eased further in recent weeks. The share of contacts reporting higher costs was unchanged from the prior reporting period, but the share reporting a decline in input costs was at its highest in more than two years.”
“Freight costs, which have been a pain point for most firms, continued to fall.”
“Selling price pressures remained elevated though they too lessened further recently. The share of contacts reporting an increase in selling prices dipped below 50 percent for the first time since April 2021.”
Richmond:
“Since the last report, the Fifth District labor market remained tight while employment grew moderately. Firms were worried that the lack of labor was impacting their customer experience. A quick service restaurant reported service interruptions in food deliveries, trash collection, and landscaping. Additionally, some firms reported reaching a ceiling on wage increases to attract and retain workers.”
“High school and college students returning to school has been especially impactful this year. One firm reported losing 40-50% of its workforce when the high school opened, further straining their ability to maintain consistent hours of operation.”
“Prices continued to rise strongly in recent weeks albeit at a slightly slower pace of growth compared to recent months. According to our most recent surveys, manufacturers reported robust year-over-year increases in prices received from customers, but growth eased somewhat from the peak set a few months ago. Likewise, service providers continued to report strong year-over-year price growth and a slight easing from the peak in August. Firms in both sectors saw a moderation in input price growth with several contacts noting that freight and energy prices have come down somewhat in recent weeks.”
Atlanta:
“Labor market pressures modestly eased since the previous report; turnover rates held steady or had improved by most accounts. However, conditions remained tight as many firms remained understaffed and continued to backfill open positions, particularly among healthcare, manufacturing, and commercial construction firms. Some contacts noted that there was greater availability of hourly workers; however, most firms indicated that workers were resistant to overtime scheduling.”
“Employers continued to focus on efforts to attract and retain workers through increased wages and bonuses, and enhancements to benefits. To address labor shortages and save costs, several contacts reported offshoring positions in addition to continued investments in automation.”
“Most employers reported upward wage pressures, although several indicated that pressure had eased in recent months. Bonuses for retention, performance, sign-on and referral continued to be reported. Several contacts said that wage increases would be more targeted going forward and many indicated a greater focus on enhancements to benefits including attractive scheduling, flexible work arrangements, expanded healthcare coverage, and more vacation.”
“District contacts noted moderation in some commodity costs like aluminum and resin over the reporting period, but supply chain imbalances remained an issue for planning and contract negotiations. Even as some input costs eased, a few contacts mentioned increasing costs for freight (a reversal of sentiment from the previous two reports), labor, and fuel.“
“Firms’ year-ahead inflation expectations decreased to 3.3 percent, on average, from 3.5 percent in August.”
Chicago:
“Employment increased moderately in late August and September, and contacts expected a similar pace of growth over the next 12 months. Contacts reported difficulty finding workers across sectors and skill levels, though there were also reports that difficulties had eased some.”
“Overall, wage and benefit costs moved up strongly and were aimed both at attracting new workers and retaining existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for workers requesting wage increases.”
“Most prices rose rapidly in July and early August, though some commodity prices fell, notably for fuel. Contacts expected the pace of price increases to slow over the next 12 months. Aside from declines in certain commodities, producer prices continued to rise, spurred by passthrough of higher overall costs for raw materials, labor, and shipping. That said, growth in producer prices slowed across many categories. Consumer prices generally moved up robustly due to solid demand and passthrough of higher costs. However, fuel costs were down, and contacts noted a greater number of promotions on a range of retail products.”
St. Louis:
“Employment has remained unchanged since our previous report. Contacts across the region continued to report difficulty filling positions and retaining workers. Some employers reported that increased flexibility and benefit policies implemented to improve retention are starting to bring about improved retention. However, there were still widespread reports of skilled tradespersons and technicians being poached by competitors. Contacts noted particular difficulty staffing weekend and late-night shifts.”
“Wages across the District have grown moderately since our previous report. Healthcare contacts reported raising wages by 7-10% this year, but the rate of wage growth has begun to slow recently. A recent survey of Arkansas firms noted 90% of trucking fleets raised their pay an average of 11% over the past year.”
“Prices have continued to increase moderately since our previous report. Although input costs have increased across the board, contacts reported mixed results in their ability to pass through costs to consumers.”
“A contact in the car industry reported no transfer of costs to consumers due to low demand for new cars. However, a contact in the hotel industry reported increased consumer prices of 15-20% due to increased labor costs and renegotiated contracts with suppliers.”
Minneapolis:
“Employment grew slightly since the last report. Total job openings have moderated; firms have reportedly reconsidered some job openings due to recession concerns or extreme difficulties in filling them. But recent surveys continued to find healthy overall demand; recruiting and staffing contacts concurred. Labor supply remained tight, however.”
“Turnover was also problematic, often for nonwage reasons, such as schedule flexibility, said a staffing contact. “Many are losing more out the back door than they can bring in.”
“Wage pressures remained high. A large share of employers reported that compensation costs increased compared with the previous month, and that trend was expected to continue.”
“Price pressures eased slightly since the last report, but remained elevated. Two-thirds of respondents to a September survey of District firms reported that their nonlabor input prices increased from a month earlier. About 40 percent had slightly increased their prices charged to customers, a decreasing share from recent months, while about 10 percent of firms said their selling prices went down. Firms’ outlooks for prices over the coming month moderated slightly.”
KC:
“Employers in the Tenth District continued to add jobs at a moderate pace during September, as momentum from past job openings kept hiring activity elevated. However, commentary from a broad set of contacts pointed to signs of cooling labor demand… Many other businesses reported that they do not plan to post new job openings in coming months, indicating uncertainty about the outlook in slowing planned hiring.”
“Contacts reported expectations that wage growth is likely to slow to a moderate pace in coming months. Although wage growth is expected to slow from recent highs, most businesses indicated the increase in labor costs being budgeted for in the coming year remains well-above historical norms. Moreover, manufacturers indicated they continue to expect wage growth to exceed historical levels, even though overall demand growth has become more sluggish.”
“Prices continued to increase at a robust pace. Most businesses indicated an improved ability to pass on higher prices to customers over the past few months, particularly for hospitality and retail businesses. Most contacts expect cost pressures to remain persistent over the next six months, broadly citing financing, energy, labor and shipping and transportation costs.”
Dallas:
“Solid employment growth continued, with a slight pickup seen in the energy sector. There were, however, scattered reports of a slowdown in hiring amid weaker demand and recession fears. Labor markets nevertheless remained quite tight.”
“Some employers have rebranded undesirable positions to attract workers. A few contacts noted a higher degree of apathy among workers towards attendance and work quality. Some contacts said their growth plans were being constrained by an inability to bring on and retain sufficient staff.”
“Wage growth eased slightly but remained high. Employees continued to demand higher pay, and companies responded in an effort to recruit and retain employees. Some contacts noted losing employees to competitors or other industries offering higher pay. A staffing firm said they were seeing a lot of workers switching jobs to attain higher wages.”
“Input costs continued to climb at about the same elevated pace as during the prior period, while growth in selling prices continued to ease… Services firms commented that the ripple effect of inflation was a challenge, and numerous contacts noted greater difficulty passing on cost increases to customers. A restaurant said their biggest concern was customer pushback on menu price increases. Retailers also said customers were starting to push back on pricing.”
SF:
“Hiring activity grew at a modest pace during the reporting period as labor markets remained tight across most sectors. Reports indicated increased employment levels despite difficulty attracting workers in manufacturing, health care, retail, professional services, and skilled trades. Real estate and construction firms as well as financial services providers reported further easing of labor supply constraints, partly due to slower activity in the housing market. Employment in leisure and hospitality remained far below target levels despite some reported increase in job applications. Airlines have adjusted their schedules in recent months to better reflect crew availability and continued to develop in-house training programs to help meet future demand.”
“Reports indicated some improvement in employee retention, but many employers continued to highlight persistently high turnover rates. Several contacts noted that worsening housing affordability has made it more difficult for firms to fill entry-level positions in urban areas. One contact reported a notable uptick in applications for evening shifts as people sought a second job to supplement their income. Due to an increasingly uncertain outlook, many contacts narrowed down their future hiring plans to critical positions.”
“Wages continued to grow, albeit at a slower pace. Reports indicated that elevated costs of living, particularly for essential expenses such as food and rent, continued to drive wage pressures upward. Employees across a range of sectors continued to demand more comprehensive benefits, flexible work arrangements, and up-front hiring incentives. However, there were several reports of hourly workers favoring higher pay over expanded benefits amid elevated price inflation.”
“Price levels remained highly elevated despite reported moderation in the rate of increase. Reports noted persistent inflation across industries and products, including prices for food, insurance, health care, legal services, packaging, and some manufacturing products, such as plastic and cardboard, due to continued cost pressures from materials and labor… Nevertheless, cooling overall demand helped alleviate some price pressures, and contacts noted more stable prices for used vehicles, construction materials, and airfares. Contacts generally expected cost pressures to persist over the coming months.”