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Fed Beige Book Signals Tight Labor Markets, No Wage Pressure, Fear Of “Prolonged Auto Slowdown”

Courtesy of ZeroHedge. View original post here.

Once again The Fed's Beige Book is brought to you by the world "modest" (used 140 times) and "moderate" (80 times) with regard to growth but did have a couple of new things to focus on with regard tight labor markets and auto production/sales anxiety.

Economic growth was modest to moderate across the U.S. in the past two months as labor markets stayed tight without much wage pressure and the auto industry emerged as one of the few possible sources of weakness, a Federal Reserve survey showed. As Bloomberg notes, the central bank’s Beige Book report, based on anecdotal information collected by the 12 regional Fed banks from early July through August, said consumer spending, capital expenditures and manufacturing all were increasing.

Employment growth “slowed some” even as worker shortages worsened.

Atlanta: Firms continued to implement various methods to attract and retain top talent, often in lieu of wage increases.

Contacts shared that in addition to offering flexible work hours and locations, more vacation time, and training and education opportunities, they were increasingly focused on social responsibility initiatives and support systems to encourage work-life harmony.

Some contacts indicated that these non-wage compensation mechanisms were losing their effectiveness, thus broad wage increases were expected in the near term.

Reports were mixed regarding auto production, and contacts in many Districts expressed concerns about a prolonged slowdown in the auto industry

  • Atlanta: Automotive dealers continued to report a slowdown in the momentum of auto sales from a year ago.
  • St.Louis: Contacts are less optimistic about the next quarter than in our previous report, with fewer than half expecting improvements, down from two-thirds last quarter. Some contacts expressed concerns about political uncertainty and a slowdown in the auto industry.
  • Kansas City: Auto sales fell moderately, but were slightly above year-ago levels. Dealer contacts anticipated a further slowdown in sales for the months ahead. Auto inventories were expected to rise slightly heading forward.

Following are selected additional anecdotes from the Fed’s Beige Book report, via Bloomberg

  • Boston: Restaurants in tourist areas such as the Berkshires, Cape Cod, and Boston’s North Shore have experienced severe staffing shortages, especially those that have historically relied on seasonal workers needing H2B visas
  • New York: New York City’s condo and co-op market has been mixed; home prices have risen at a roughly 5 percent annual rate in Brooklyn and Queens but have been flat in Manhattan
  • Philadelphia: A Delaware shore contact noted concerns about shorter stays and more cautious spending, and Atlantic City’s July casino revenues fell relative to July 2016
  • Cleveland: Homebuilders cited a shift in buyer preference from homes in the move-up price point categories to those in the lower price points. One builder described this sudden shift as unusual
  • Richmond: A West Virginia lender reported seeing secondary market mortgage lenders offering low and no down payment mortgage loans in an effort to combat the flat demand
  • Atlanta: Firms continued to implement various methods to attract and retain top talent, often in lieu of wage increases. Contacts shared that in addition to offering flexible work hours and locations, more vacation time, and training and education opportunities, they were increasingly focused on social responsibility initiatives and support systems to encourage work-life harmony
  • Chicago: There were multiple reports of rising prices for older used cars
  • St. Louis: St. Louis dealers indicated a shift in demand toward low-end vehicles
  • Minneapolis: A staffing contact said that the recently passed $15-per-hour minimum wage in Minneapolis – being implemented over five years – was rippling across wage expectations of workers earning below or near that level
  • Kansas City: All sectors except the auto sales and tourism sectors expected an increase in employment in the months ahead
  • Dallas: Agricultural producers were concerned about the renegotiation of NAFTA, as many rely on export markets to sell their products
  • San Francisco: Legalization of cannabis increased demand for low-skilled workers in parts of the District.

Of course, the impact of Hurricane Harvey is barely included: Some Districts received preliminary information from business contacts regarding the impact of the storm

  • Many firms and organizations in the affected areas closed due to flooding
  • A fifth of the oil and natural gas production in the Gulf of Mexico was offline
  • The Port of Charleston expected increased volumes in coming weeks as freight traffic is routed away from the Port of Houston

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