U.S. economic expansion has continued at a slight to modest pace since the last iteration of the Federal Reserve’s Beige Book. Reports from districts representing states in the southern and western U.S. generally were more upbeat than districts representing the Midwest and Great Plains.
Household spending was solid on balance, and nonauto retail sales increased modestly. Light vehicle sales were generally robust. Tourism and travel-related spending was up modestly, and housing market conditions changed little.
On the business spending side, nonresidential construction increased at a slightly slower yet still modest pace, while leasing activity advanced at a slow but steady rate. Manufacturing activity continued to edge lower, but the early impact of a recent auto strike was limited. Freight shipments stabilized after falling during the previous reporting period, but agricultural conditions deteriorated further due to the ongoing impacts of adverse weather, weak commodity prices and trade disruptions. Business contacts mostly expect the economic expansion to continue; however, many lowered their outlooks for growth in the coming 6 to 12 months.
Employment rose slightly amid reports of persistent worker shortages. Labor market tightness across skill levels and occupations was widely cited as a factor restraining hiring. Districts often reported relatively stronger demand for workers in the professional services and information technology industries.
By contrast, hiring in freight and manufacturing was weak. A number of districts reported that manufacturers reduced their headcounts because orders were soft. However, some firms were more concerned about the longer-term availability of workers and subsequently chose to reduce hours rather than staff levels.
Wages rose moderately in most districts, with upward pressure noted for lower-skill workers in the retail and hospitality industries and for higher-skill professional and technical workers. A number of smaller firms reported difficulty matching pay offers from larger firms. Broadly, employers continued to use non-wage approaches such as bonuses and benefits to attract and retain talent.
Most districts characterized the recent pace of price increases as modest, with both retailers and manufacturers noting rising input costs (often for items subject to new tariffs), but retailers had relatively more success passing through these cost increases to their customers. Despite a recent increase in fuel costs, some reports suggested that shipping rates remained lower than they were earlier this year because of excess capacity in the industry.