Businesses Face Higher Wages, but Inflation Remains Modest: Fed

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© Reuters.

By Yasin Ebrahim

.com – growth continued at a modest pace, and businesses are likely to face a pickup in wages over the next several months, but overall will likely remain steady, according to the Fed’s Beige Book released Wednesday. 

The central ’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Feb. 22, showed the U.S. economic and labor market growth as well as inflation remained modest even as the distribution of vaccines picked up pace.

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“Most Districts reported that employment levels rose over the reporting period, albeit slowly … with supply shortages [the] most acute among low-skill occupations and skilled positions. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the next several months,” according to the Beige Book.

The update on the labor market comes just as data on Wednesday showed fewer than expected jobs were created in the private market, tempering optimism somewhat ahead of the nonfarm payrolls report due Friday. 

The impact of faster wage growth, however, is not expected to translate into a faster pace of inflation at time when input costs are rising moderately, by steel and lumber prices as many retailers are not able to pass prices through to the consumer.

“Several Districts reported modest wage increases for high-demand positions with many also noting upward pressure on wages to attract and retain employees. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the next several months,” the Beige Book showed. 

The outlook on the consumer, the backbone of the U.S. economy, remains murky at best amid ongoing Covid-19 restrictions. 

“Reports on consumer and auto sales were mixed. Although a few Districts reported slight improvements in travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing COVID-19 restrictions,” according to the report.

Source: Investing.com

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