Businesses are reporting persistent labor market tightness across the United States, with accelerating wage gains in many regions, the Federal Reserve said on Wednesday in a report that bolstered the case for interest rate increases.
The U.S. central bank’s assessment appeared to indicate a slight strengthening of the labor market since it last issued its Beige Book report in mid-January.
“Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers,” the Fed said in the report, a collection of anecdotal information from businesses assembled before each policy meeting.
“Several districts reported continued worker shortages across most sectors,” according to the report, which said they were often reported by businesses in the construction, information technology and manufacturing sectors.
The Fed also noted that four of its 12 districts saw a “marked increase” in steel prices due in part to a decline in foreign competition. President Donald Trump announced last week a plan to impose a 25 percent tariff on steel imports.
Overall, U.S. economic activity expanded at a “modest to moderate” pace in January and February and price gains were moderate, the Fed said. Those assessments were similar to those from its prior Beige Book report.
Financial markets expect the U.S. central bank to raise interest rates later this month. Fed policymakers projected three rate increases for 2018 at a December policy meeting. They
also raised rates at that meeting.
A range of Fed policymakers have argued in recent weeks that rates need to rise gradually to keep tightness in the labor market from eventually fueling high inflation.
While the Beige Book report is not a systematic survey, it does reflect each district’s sense of the regional economy.
The San Francisco Fed compiled Wednesday’s report with information from the central bank’s 12 districts collected on or before Feb. 26, 2018.