High demand, but worker shortage hampering employment growth: Beige Book

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October 21, 2021

Employment increased at a modest to moderate rate in September through early October; demand for workers was high, but labor growth was dampened by a low supply of workers, according to the Federal Reserve Beige Book report released Wednesday.

Transportation and technology firms saw particularly low labor supply while many retail, hospitality and manufacturing firms cut hours or production because they did not have enough workers. Firms also reported high turnover as workers left for other jobs or retired. Childcare issues and vaccine mandates were widely cited as contributing to the problem, along with other Covid-related absences.

“Many firms offered increased training to expand the candidate pool,” the report stated. “In some cases, firms increased automation to help offset labor shortages.”

Robust wage growth was reported by the majority of districts as firms increased starting wages to attract talent and increased wages for existing workers to retain them. Many also offered signing and retention bonuses, flexible work schedules or increased vacation time to incentivize workers to remain in their positions.

Despite the return of children to school and the end of enhanced unemployment benefits, staffing firms and other contacts in the Philadelphia district reported only a slight uptick in new applicants, at best. Many interview candidates were arriving with other offers in hand and firms are also working harder to retain workers by raising wages. Wage pressures remained high for lower-wage jobs, with one staffing firm not accepting new clients that offer below $15 an hour.

Minnesota staffing firms reported that both total clients and job orders were up; placements were also higher, but unfilled job orders were rising even faster. Firms continued to struggle finding labor. Overall, Minnesota staffing firms reported a modest increase in labor availability after pandemic-era unemployment benefits stopped. However, other business workforce contacts reported little increase in labor supply.

However, some staffing services contacts in the Dallas district expect recruiting to become easier in upcoming months now that federal unemployment benefit programs have ended. They reported strong demand across industries, with particularly robust demand in healthcare, construction and information technology.

Overall, the Beige Book noted economic grew at a “modest to moderate rate.” Outlooks for near-term economic activity remained positive, overall, but some districts noted “increased uncertainty and more cautious optimism” than in previous months.

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