Most regions of the United States continue to see modest to moderate growth, but optimism about the economic outlook has waned, partly due to concerns over government policies, the Federal Reserve said Wednesday.
Labor shortages, especially for skilled workers, are forcing companies to offer more generous and flexible conditions, but so far that has not translated into worrisome wage pressures, the Fed said in its periodic survey of the economy.
The so-called beige book prepared ahead of the June 14-15 monetary policy meeting, did not seem to offer any reports from the frontlines of the economy to alter the widespread expectation the Fed will raise the benchmark lending rate in June.
The central bank raised rates in March and December, amid a wave of economic optimism in the early days of President Donald Trump’s term, with his promises of tax cuts, deregulation and big infrastructure spending.
The minutes of the May 2-3 meeting, when the Fed kept the interest rate unchanged, indicated it likely would be time to hike rates again “soon.” Most analysts expect two more rate increases this year, in June and again in September.
But though the minutes said central bankers would need a clear sign that the slow first quarter was only “transitory” before making another move, it is unlikely the beige book cast enough doubts to alter the expected schedule.
“A majority of districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few districts,” according to the report that covers early April through late May.
The Dallas Fed cited a few firms that said “they were in wait-and-see mode due to uncertainty surrounding US trade policies,” a view echoed by the San Francisco Fed, which also pointed to the strong dollar as a concern for some manufacturers.
The St Louis Fed said some manufacturing firms “expressed concerns about regulatory uncertainty and the difficulty finding employees,” while in the Philadelphia region, “the breadth of optimism has narrowed.”
Companies and investors initially were cautiously optimistic that Trump’s promises of tax cuts and reduced regulation could spur economic growth in the near term, but so far there have been few concrete policy proposals, while a series of controversies and missteps cast doubt on whether his program can be implemented quickly.
The situation in the labor market is always central to Fed decision making, since higher wages usually translate to increased spending and rising prices, but so far there are no signs of that, according to the beige book.
In fact, there were reports that consumer spending slowed or even declined in many districts, while “pricing pressures were little changed from the prior report.”
“Labor markets continued to tighten, with most Districts citing shortages across a broadening range of occupations and regions,” the Fed said.
But across the country companies “noted little change to the recent trend of modest to moderate wage growth, although many firms reported offering higher wages to attract workers where shortages were most severe.”
Some of the reports were surprising, including a Chicago firm that raised wages for unskilled workers by 10 percent to attract “better applicants” and improve retention.
In New York, employers were “increasingly negotiable on pay” for skilled and specialized workers, while in Atlanta and other districts firms created training and development programs to attract workers.
Even with shortages especially of engineers and technical positions, hiring continued, according to the report.
However, despite the increased hiring, “consumer spending softened in many Districts,” the Fed said.
Join GhanaStar.com to receive daily email alerts of breaking news in Ghana. GhanaStar.com is your source for all Ghana News. Get the latest Ghana news, breaking news, sports, politics, entertainment and more about Ghana, Africa and beyond.