For the Federal Reserve, really only two things matter right now: wages and inflation.
On Wednesday, the latest Beige Book report from the Fed crossed the tape and showed that the labour market remains tight, wage growth continues to point north, and inflation pressures remain modest.
Here’s the full rundown from the Fed (emphasis and extra spacing added):
Employment expanded at moderate pace since the previous report. Conditions in the labour market remained tight in the Boston, Chicago, New York, San Francisco, St. Louis, and Minneapolis Districts. In Boston, contacts reported an unusually high number of job openings, and in the Richmond District turnover rates increased for entry-level positions.
Employment gains were only modest in Cleveland, and contacts in Philadelphia reported an increase in part-time employees and longer workweeks along with a reduction in full-time hires. In many Districts, businesses reported trouble filling job vacancies for high-skilled positions, especially those aimed at technology specialists, engineers, and selected construction workers. Overall, employment declined in the carbon extraction industry; however, contacts in the Atlanta District reported an uptick in hiring at petrochemical refining companies.
Wage growth ranged from flat to strong across the Districts, but most reported that wage pressures remained fairly modest. Contacts in Minneapolis reported moderate wage pressures, while contacts in St. Louis and San Francisco reported strong wage growth.
On balance, wage pressures increased for highly skilled workers in many Districts, and contacts in San Francisco reported continued strong wage growth for technology specialists. In Cleveland, wage pressures were most evident in the construction and retail sectors. In Philadelphia, wage pressures were modest, but contacts reported upward pressure to employee benefit expenses from rising health-care costs. In general, expectations of wage growth for the coming months were modest.
Overall price inflation was modest. The Boston, Chicago, Cleveland, and Dallas reports suggested that prices were largely unchanged from the previous period. St. Louis reported modest price pressures. Businesses in the Atlanta and Kansas City Districts reported slight increases in input prices, while reports on selling prices were mixed.
The prices of finished goods rose at a somewhat slower pace in Richmond, compared with the previous reporting period. Contacts in several Districts expect prices to increase modestly in the coming months, and manufacturers in Philadelphia are expecting smaller price increases than nonmanufacturers.
In August, wages rose 2.4% over the prior year, just off a post-crisis high.
The latest inflation data showed that while core consumer prices remain firm, we’re not yet seeing a major acceleration much beyond the Fed’s 2% target.
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