WASHINGTON – A tightening labor market is putting broader pressure on wages as U.S. firms increasingly report trouble filling low-skilled jobs, according to a new Federal Reserve report.
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In a couple regions, "worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation and construction," the Fed said Wednesday in a roundup of anecdotal information on regional economic conditions, known as the beige book. The latest report was based on anecdotes covering mid-February through the end of March across the central bank's 12 districts.
The report found that "modest wage increases broadened" and "employers in most districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers."
More broadly, the Fed said economic activity expanded across all 12 districts, "with the pace of expansion equally split between modest and moderate."
Inflation continued to firm, with prices reported as rising modestly. "Businesses mostly expected mild to moderate price growth to persist in the next several months," the report said.
Some districts reported uncertainty about the outlook for trade policy under the new Trump administration. The Boston Fed said "a manufacturer of test equipment which exports a significant portion of its production worried about trade deals." The Dallas Fed said "a few manufacturing contacts noted considerable policy uncertainty, especially regarding any changes that would impact trade with Mexico."
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A few businesses also raised immigration concerns. The Minneapolis Fed said "firms catering to tourists in the Black Hills region reported difficulty finding labor, especially seasonal immigrant labor they have traditionally used." And in the San Francisco Fed's district, "hotel stays were lower than expected due to changes in immigration policy and increased scrutiny of foreign arrivals," the report said.
The Fed's policy-setting committee is scheduled to hold its next meeting in two weeks, on May 2-3.
The U.S. central bank raised its benchmark short-term interest rate in mid-March, and officials penciled in two more quarter-percentage-point rate increases by the end of 2017. Policy makers also have signaled they might start to shrink the Fed's $4.5 trillion portfolio of mortgage and Treasury securities later this year or in 2018.
Forecasters think the Fed is likely to stay on hold until June or later. Business and academic economists surveyed by The Wall Street Journal this month saw the average probability of a May rate increase at just 14%.
The Fed's latest beige book report can be accessed at: https://www.federalreserve.gov/monetarypolicy/beigebook/
Write to Ben Leubsdorf at firstname.lastname@example.org and Sarah Chaney at email@example.com
(END) Dow Jones Newswires
April 19, 2017 14:15 ET (18:15 GMT)