The economy of the Sixth District of the Federal Reserve grew at a modest pace from January through mid-February, according to the Federal Reserve Bank of Atlanta. The Federal Reserve’s Sixth District includes Alabama, Florida, and Georgia, and portions of Louisiana, Mississippi, and Tennessee.
The report is part of the Federal Reserve’s regular commentary on economic conditions throughout the United States. Commonly known as the Beige Book, the report is published eight times a year and is meant to inform members of the Federal Reserve based on reports and interviews with business contacts, economists, and other sources.
According to the Sixth District, labor markets improved somewhat amid persistent wage pressures. Many nonlabor costs increased, particularly food, utilities, and insurance; however, freight and shipping costs moderated. Low-income families continued to face barriers to full-time employment opportunities, and rising food and gas prices further strained household budgets. District retail sales exceeded expectations, and auto sales remained solid. Leisure travel activity showed continued strength, and business travel grew.
Housing demand improved slightly as mortgage rates fell. Commercial real estate activity slowed. Transportation activity was mixed. Loan growth at financial institutions was solid, but delinquency rates rose slightly. On balance, energy demand was strong. Agricultural conditions remained mixed.
Labor Markets
Labor market pressures continued to ease since the previous report; however, contacts still described conditions as tight, especially among front-line, skilled trades, and IT positions. Most firms continued to hire. Layoffs or hiring freezes were noted by a few contacts, but they were largely limited in scope. Restaurants continued to close dining rooms and other firms noted postponing planned projects due to lack of available labor. To combat labor shortages, firms reported investments in training to upskill employees and capital expenditures in technology to reduce reliance on labor. Overall turnover has eased somewhat but not among hourly paid staff, who continued to change jobs for higher pay. Several employers also noted that affordable housing and childcare availability and costs further restrained the supply of workers at all levels.
Wage pressure remained persistent, though some easing was noted. Several contacts indicated that the wage levels for various positions, especially lower wage jobs, jumped significantly over the last year. Upward wage pressure is expected to persist this year, but many firms are targeting more modest increases than last year.
Prices
District contacts noted moderation in freight and shipping costs along with improvements in supply chain imbalances over the reporting period. Some construction inputs, like lumber, saw prices decline, while concrete prices rose, increasing building project costs, on balance. Food and utilities costs also rose, further straining businesses' balance sheets. Rising insurance costs and wages were cited most often as risks to the business outlook over the coming year.
The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth at 3.5 percent, on average, in February, down from 4.3 percent in January. Firms' year-ahead inflation expectations were relatively unchanged at 2.9 percent in February, on average.
The full report for all twelve Federal Reserve District
Banks can be found at https://www.federalreserve.gov/monetarypolicy/publications/beige-book-default.htm
