US businesses cite labor market difficulties as greatest challenge: Fed Beige Book

WASHINGTON - Business contacts tended to cite labor market difficulties as their "greatest challenge," followed by supply chain disruptions, the US Federal Reserve said in a survey released on Wednesday.

All 12 Federal Reserve districts have reported continued economic growth since the prior period, with a majority indicating "slight or modest growth," the Fed said in its latest Beige Book, a survey on economic conditions based on information collected from its 12 regional reserve banks.

Four districts indicated "moderate growth", and four districts explicitly noted that "the pace of growth had slowed" since the prior period, said the Beige Book, which is published eight times per year.

The Beige Book said contacts in most districts reported ongoing growth in manufacturing. "Retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts observed weakness as buyers faced high prices and rising interest rates," it said.

Rising interest rates, general inflation, the Russian-Ukraine conflict, and disruptions from COVID-19 cases (especially in the Northeast) round out the "key concerns" impacting household and business plans, according to the Beige Book.

Eight districts reported that expectations of future growth among their contacts had "diminished," while contacts in three districts "specifically expressed concerns about a recession," it noted.

Noting that contacts tended to cite labor market difficulties as their "greatest challenge," the Beige Book said most districts reported that employment rose modestly or moderately in a labor market that all districts described as "tight."

The number of job openings decreased by 455,000 to 11.4 million on the last business day of April, the US Bureau of Labor Statistics reported Wednesday. In April, the number of hires was little changed at 6.6 million.

The Beige Book noted that worker shortages continued to force many firms to operate below capacity. "In response, firms continued to deploy automation, offer greater job flexibility, and raise wages," it said.