Economy Watch: Beige Book Notes Strong Economy, Labor Shortage

Many firms are responding to talent shortages by increasing wages, but only at a modest pace, according to the Federal Reserve's latest Beige Book.
Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System

The U.S. economy is humming along nicely, according to the Federal Reserve in the latest Beige Book, which it released on Wednesday. According to the central bank, “economic activity expanded moderately in late April and early May with few shifts in the pattern of growth.”

There is upward pressure on wages, the report also noted, but not a vast response to it among employers just yet.

“Shortages of qualified workers were reported in various specialized trades and occupations, including truck drivers, sales personnel, carpenters, electricians, painters and information technology professionals,” the book said. “Many firms responded to talent shortages by increasing wages as well as the generosity of their compensation packages. In the aggregate, however, wage increases remained modest in most Districts.”

The report also said that there were several reports of rising materials costs, notably for steel, aluminum, oil, oil derivatives, lumber, and cement—all of which will impact the cost of construction. Input cost increases, along with labor shortages in some sectors and strengthening demand, put upward pressure on prices in the construction sector, as well as transportation and manufacturing.