Fed's Beige Book: Tight Labor Markets, But Wage Gains Modest

Economic activity across the U.S. expanded into 2018, with tight labor markets and modest wage and price growth, according to a Federal Reserve report released Wednesday.

Most of the Fed's 12 regional districts reported modest to moderate economic gains while the Dallas Fed district saw robust growth, the Fed said in a roundup of anecdotal information about regional economic conditions known as the beige book. The latest report was based on information collected through Jan. 8.

Employment continued to grow at a modest pace, with most districts reporting labor shortages, which were said to constrain growth in some cases, the report said.

Wages grew at a modest pace, though a few districts said firms were raising wages across more industries and positions, the report said. That could signal that difficulty finding and retaining employees may be pushing employers to offer more generous pay packages in response.

Prices grew modestly to moderately in most regions, the report said. Several districts noted increases in manufacturing, construction and transportation input costs, while businesses in some districts said they now have the ability to increase their selling prices.

Holiday sales were higher than expected for some retailers, and real-estate activity was constrained by limited housing inventory, the report said.

Wednesday's beige book report comes after U.S. inflation was largely subdued in 2017. Key Fed officials think it is poised to pick up in the new year.

The Labor Department released consumer-price data last week that showed core prices jumped 0.3% in December from the prior month, the most in nearly a year. Workers in metro areas with the lowest unemployment are experiencing some of the strongest wage growth in the country as the jobless rate hovers at 4.1%, a 17-year low. Sales at U.S. retailers notched the strongest year for sales growth since 2014.

Still, December's consumer-price report didn't show prices rising broadly. Shelter costs accounted for much of last month's rise in prices, and annual inflation measures remain subdued. Growth in average hourly earnings has been muted as well.

Fed officials think the strengthening labor market, pay raises and healthy consumer spending should lead to stronger price increases. Federal Reserve Bank of New York President William Dudley said in a recent speech he was more concerned about the economy overheating than he was about price growth stalling.

Write to Sharon Nunn at sharon.nunn@wsj.com and Ben Leubsdorf at ben.leubsdorf@wsj.com.

(END) Dow Jones Newswires

January 17, 2018 14:15 ET (19:15 GMT)