March 2017 Federal Reserve Board's Beige Book
DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on March 1, 2017. It "... was prepared at the Federal Reserve Bank of New York based on information collected on or before February 17, 2017. This document summarizes comments received from business and other contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials."
The excepts were chosen for their relevancy to the recruitment, staffing, employment services, and IT services sectors. The inclusion or exclusion of any sections or wording, the inclusion of each District's service areas (note that sections of some states are divided and end up in more than Fed District), as well as emphasizing certain sections with special typefaces (e.g. bold-faced) was done solely at the discretion of steinbergemploymentresearch.com. The full report can be found at the Federal Reserve Board.
Since there are several references to changes 'since the last report,' our summation of the previous report is here.
The next Beige Book is expected to be released on April 19, 2017, at which time we will offer our next summation. If you want to receive notification when it is posted, please fill-in the form above.
First District -- Boston (CT, MA, ME, NH, RI & VT)
First District businesses contacted in early February reported modest to moderate increases in activity from a year earlier. Retailers cited flat or single-digit increases in sales, while two-thirds of responding manufacturers saw revenue gains. Staffing firms mostly saw slight year-over-year declines in revenues, attributable in part to tight labor supply. ... Across most sectors, input and selling prices were stable, although staffing firms have raised bill and pay rates. While some responding firms expressed concern about increased uncertainty, most continued to say they were upbeat about 2017.
Employment and Wages
Manufacturing and Related Services
Of nine manufacturing contacts, six reported sales gains versus the same period a year earlier, two noted little change and one reported lower sales. For those reporting growth, it was generally stable. One of the firms reporting no growth said it reflected an exceptionally strong start to 2016.
Although contacts were generally positive about the near-term outlook, many expressed concerns about policy changes from the new administration. Three mentioned that the border adjustment tax would present a problem for them. A manufacturer of semiconductor equipment said that restrictions on the H1B visa program would affect its ability to staff positions. Another said that uncertainty about policy was the problem; for example, a border adjustment tax would have a big effect on where they located future production facilities and they would be reluctant to commit to new investment without some resolution of the issue. ...
Economic activity in the Second District has picked up since the last report, expanding at a modest pace, and labor markets have strengthened. Increases in both input costs and selling prices have become more widespread. Manufacturers noted a brisk pickup in business activity in early 2017, while service-sector contacts have continued to report steady to moderately expanding activity. ...
Employment and Wages
Contacts at employment agencies reported that the labor market has remained tight and that hiring activity has been fairly brisk for this time of year. One contact in upstate New York noted a recent pickup in hiring at manufacturing and tech firms, while an agency in New York City reported brisk hiring from small to medium sized financial firms.
Contacts in most industries reported continued modest wage growth, though contacts in the leisure and hospitality sector noted a more significant pickup. Contacts at major employment agencies across the District report that starting salary offers have generally been steady to rising modestly, though they have risen more noticeably for some high-skill workers that are in short supply. While it is too early to assess any overall effects on wages and employment resulting from the January 1 increase in New York State's minimum wage schedules, a couple of contacts in the leisure and hospitality industry indicated that they have faced some challenges.
Manufacturing and Distribution
Third District -- Philadelphia (DE, PA & NJ)
Aggregate business activity in the Third District continued at a modest pace during the current Beige Book reporting period. Notable shifts in activity included manufacturing and homebuilding, which improved to a moderate pace of growth. Four sectors -- nonauto consumer spending, lending, and nonresidential construction and leasing -- were essentially unchanged, after growing at a modest pace in the prior period. ... According to most contacts, employment, wages, and prices continued to grow at a modest pace. ...
Employment and Wages
Staffing firms described themselves as busy. In some cases, activity picked up immediately following the holiday lull and continued at a steady pace.
Wage pressures continued to be modest with little shift in reporting on wage levels or labor market tightness. Staffing contacts noted little change in overall wage pressures. A somewhat lower percentage of nonmanufacturing contacts reported wage increases than during the prior period.
A greater percentage of firm contacts in a broader range of sectors reported increased manufacturing activity than in the previous period, suggesting moderate growth overall. Contacts reported that new orders picked up to a moderate pace of growth, while shipments continued at a modest pace.
Overall, gains in activity were indicated by most major sectors, including the makers of lumber products, paper products, chemicals, primary and fabricated metal products, industrial machinery, and electronic products.
More than half of the manufacturing contacts were optimistic that orders, shipments, and general activity would grow over the next six months, similar to the prior Beige Book period. About one-third of the contacts expressed expectations for increased capital expenditures, although this was a bit lower than the prior period.
Fourth District -- Cleveland (KY, OH, PA & WV)
Economic activity grew moderately on balance across the Fourth District during the current reporting period. Labor markets continued to show signs of tightening, with moderate wage gains. Upward pressure on prices paid and prices received dampened slightly. ... Nonfinancial services firms experienced slight revenue growth overall, but demand was strong for IT and data analytics services. ...
Employment and Wages
Factory output picked up slightly since our last report. Activity for suppliers to the aerospace, construction, and motor vehicle industries remains elevated. Manufacturers of food service and warehouse automation equipment cited strong growth during 2016. ...
Activity in the nonfinancial services sector grew slightly over the period. Strongest demand was seen in the IT and data analytics, commercial real estate services, and management consulting segments. Several contacts observed that clients were in a wait-and-see mode prior to the presidential election and that demand for services picked up post election. An engineering design firm reported that through much of 2016, clients had been hesitant to move forward with projects, especially large projects. That said, there was a noticeable pickup in project feasibility studies since the presidential election. Similarly, a law partner noted that demand for legal services was stable through most of 2016. However, in the fourth quarter, his firm saw a broad-based uptick in demand. A landscape architecture firm reported a large spike in RFPs during December, especially for nontraditional services. The firm indicated that many of these projects had been postponed for years and that property owners are now feeling confident about the economy.
Fifth District -- Richmond (MD, NC, SC, VA & WV)
Economic activity in the Fifth District grew moderately since the previous Beige Book report. Labor demand continued to increase and there were more reports of employees being converted from temporary to permanent workers. ...
Sixth District -- Atlanta (AL, FL, GA, LA, MS & TN)
Business contacts indicated that economic activity in the Sixth District
continued to expand, albeit modestly, from the previous report. The outlook
among contacts for the next three to six months remains positive.
Seventh District -- Chicago (IA, IL, IN, MI & WI)
Growth in economic activity in the Seventh District picked up to a moderate pace in January and early February, and contacts expected activity to continue rising at a moderate pace over the next six to twelve months. Employment, wages, business spending, and manufacturing production all grew at moderate rates, consumer spending increased modestly, and construction and real estate activity rose slightly. ...
Eighth District -- St. Louis (AR, KY, IL, IN, MO, MS & TN)
Economic conditions have continued to expand at a modest pace since our previous report. General retail sales growth was modest, while manufacturing activity showed signs of strengthening. Conversely, reports from auto dealers indicated a slight decline in first-quarter sales. Business contacts surveyed in mid-February continued to hold an optimistic outlook for growth in 2017. On net, 57 percent of contacts expect District economic conditions in 2017 to be better or somewhat better than last year. This was a slight improvement since contacts were surveyed in mid-November.
Employment and Wages
Employment has increased modestly since the previous report. On net, 25 percent of business contacts surveyed in mid-February reported that first-quarter employment was higher or slightly higher than a year ago; 18 percent reported hours worked were higher or slightly higher. District contacts continue to report that the labor market remains tight. Manufacturing, real estate, and construction contacts in St. Louis reported difficulties finding qualified candidates, and contacts in Memphis and Louisville reported an inability to fill key positions.
Contacts reported moderate wage growth since the previous report. On net, 63 percent of contacts reported wages were slightly higher or higher than a year ago. Contacts in Little Rock reported that wages for skilled workers continue to increase slowly, with more employees changing employers for higher wages. Contacts in Memphis and Louisville reported upward pressure on wages for both skilled and unskilled positions.Manufacturing
Manufacturing activity has increased at a moderate pace since our previous report. Several companies reported capital expenditure and facility expansion plans in the District, including motor vehicle, food product, and wood product manufacturers. In a recent survey, contacts reported an improvement in manufacturing conditions. A strong majority reported that production, new orders, and capacity utilization increased in the first quarter relative to one year ago. This is an improvement from our previous survey, when most contacts reported no change in activity from one year earlier. Contacts were also optimistic about the second quarter, with three-fourths expecting further growth in production, new orders, and capacity utilization. Despite the optimistic outlook, some contacts expressed concerns about labor shortages and possible trade restrictions.
Ninth District -- Minneapolis (MI, MN, MT, ND, SD & WI)
The Ninth District economy grew modestly overall since the last report. Employment grew moderately, accompanied by moderate wage and price pressures. The District economy showed growth in manufacturing, residential construction, energy, and mining. But real estate and consumer spending were mixed, commercial construction slowed, and agriculture remained weak.
Wage pressure was moderate to strong since the last report. A Minnesota state official noted that wages grew 4 percent in 2016, and manufacturing paychecks rose by even more. Ad hoc surveys of employers in two regions suggested that average wages in these locations grew about 3 percent in 2016. Their wage expectations for 2017 were slightly lower; however, given tight labor conditions, a lower wage outlook for 2017 might stem from historical expectations of long-standing wage stagnation. The owner of a southern Minnesota staffing agency expected manufacturing wages in the region to grow 8 percent to 10 percent in the coming year. "There's a huge demand and low supply. Wages need to match in order to supply workforce."
Tenth District -- Kansas City (CO, NM, MO, NE, OK & WY)
District economic activity continued to expand modestly compared to the previous survey period, and contacts in most sectors expected additional gains in the months ahead. ... The manufacturing sector continued to expand moderately, and contacts in the professional, high-tech, transportation and wholesale trade sectors reported increased sales. ... Employment and employee hours edged up in January, and wages increased slightly. ...
Contacts in most sectors reported that the pace of wage growth slowed compared to the prior survey, but wages still rose slightly. In addition, moderate wage growth was anticipated in the coming months.
Manufacturing and Other Business Activity
Outside of manufacturing, contacts in the professional, high-tech, and transportation sectors reported moderate increases in sales, with strong gains anticipated in future months. Wholesale trade contacts noted a slight uptick in sales and expected activity to increase sharply heading forward. Professional, high-tech, and wholesale trade firms reported favorable capital spending plans, while transportation contacts expected capital spending to continue to fall.
Eleventh District -- Dallas (LA, NM & TX)
Economic activity in the Eleventh District expanded moderately over the past six weeks. Manufacturing demand strengthened, and activity among nonfinancial services firms increased. ... Employment and wages increased, as did prices. Outlooks generally improved.
Employment and Wages
The manufacturing sector expanded again over the past six weeks. Output growth remained a bit stronger for durable goods than nondurables, although weakness persisted in fabricated metals --a segment with strong ties to the energy industry. However, a few fabricated metals manufacturers indicated activity has begun to increase in 2017. Exports remained a source of weakness for firms that sell internationally, with the strong dollar and softness in Mexico's economy hurting sales. Overall, outlooks remained positive. A few manufacturing contacts said their customers held a "wait and see" approach and that there is considerable uncertainty, including over the potential impacts related to policy changes from the Trump Administration. ...
Demand for nonfinancial services generally continued to increase over the past six weeks, with numerous reports of rising business activity. Most staffing services firms saw a pickup in demand. Staffing demand remained particularly strong in Dallas, with a surge in information technology, and rose slightly in Houston, including in the oil and gas sector. Professional and technical services firms noted increased revenues, while several reports from leisure and hospitality firms cited declines. Transportation services firms noted mixed movements in cargo volumes. Overall, most services firms noted improved outlooks. However, several expressed concern about uncertainty surrounding the new administration's potential policy changes and the resulting impact of those changes.
Twelfth District -- San Francisco (AK, AZ, CA, HI, ID, NV, OR, UT, & WA)
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of mid-January through February. Overall price inflation was mild, while upward wage pressures strengthened. ... Conditions in the manufacturing sector remained mixed, and activity in the agriculture sector was largely unchanged....
Employment and Wages
Wage pressures intensified in general as labor market conditions remained tight throughout much of the District. Seasonal job loss in the retail sector was less pronounced at the end of the holiday season than in previous years. Talent shortages in the technology industry have increased the time required to fill positions and the cost per hire. ... In the financial services industry, shortages of skilled bankers and credit analysts have boosted wages for those occupations. One contact in the hospitality industry reported a continued shortage of workers across all job categories despite wage increases, signing bonuses, and increased recruiting efforts. Shortages of construction workers and contractors persisted.
Conditions in the manufacturing sector remained mixed. New orders and production of manufactured pharmaceuticals remained strong. Conditions in the semiconductor industry stabilized, but exporters remain concerned about the value of the dollar and potential trade conflicts. ... Contacts in the metals fabrication industry noted that heavy equipment sales were weak, reducing demand for manufactured parts and accessories..
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last updated March 01, 2017