Employment increased at a modest to moderate pace since mid-January, according to the Federal Reserve’s Beige Book report released Wednesday. Widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity, though some districts reported scattered signs of improving labor supply.
Many firms have faced difficulty maintaining their staffing levels due to high turnover, the report found. This challenge was exacerbated by Covid-19 disruptions in January, though workers and firms recovered more quickly than during previous waves. Firms continued to increase compensation and introduce workplace flexibility to attract workers — especially in historically low-wage positions — with mixed success. Contacts reported they expect the tight labor market and consequent strong wage growth to continue, though a few districts reported signs of wage growth moderating.
Overall, the Beige Book report noted that economic activity has expanded at a modest to moderate pace since mid-January. The overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.
Comments about staffing from Beige Book districts include:
Boston: Revenues at staffing firms were mixed but up modestly on average. Staffing firms noted that turnover remained elevated at their own firms as well as at client firms. One contact offered bonuses to new hires who stayed in their roles for at least 90 days, and another boosted salary for its own recruiters to improve retention. Staffing firms’ billing rates increased commensurate with increases in pay rates, leaving their margins roughly unchanged.
New York: Staffing agencies reported that job openings remained plentiful, particularly for technology, sales and human resource workers. One agency in New York City noted that many job candidates are being selective based on telecommuting policies, while an upstate New York firm noted that vaccination policies are a major sticking point. Worker shortages persist across a wide range of industries and occupations.
Philadelphia: Staffing firms and most employers continued to report significant difficulty attracting and retaining labor, while the surge in omicron cases created daily staffing challenges. One staffing firm noted that one staff member spent most of two weeks just keeping tabs on Covid cases among its placements.
Cleveland: A few staffing agents expected wage growth for lower-paid workers to slow in the coming year, saying that businesses cannot afford to pay much more. However, contacts expect wage pressures for higher-skilled workers to remain elevated.
Dallas: Growth in the Texas service-sector activity slowed sharply in January but rebounded in February. A bright spot in the service sector was staffing services, which saw a pickup in revenue and broad-based, robust demand.
The Beige Book report is available online.