U.S. Federal Reserve (10/19/22)

Economic activity expanded modestly on net since the previous report, but conditions varied across industries and districts. Four districts noted flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions. Manufacturing activity held steady or expanded in most districts in part due to easing in supply chain disruptions, though there were a few reports of output declines. Outlooks grew more pessimistic amidst growing concerns about weakening demand. Employment continued to rise at a modest to moderate pace in most districts. Several districts reported a cooling in labor demand, with some noting that businesses were hesitant to add to payrolls amid increased concerns of an economic downturn.

There also were scattered mentions of hiring freezes. Overall labor market conditions remained tight, though half of districts noted some easing of hiring and retention difficulties. Competition for workers has led to some labor poaching by competitors or competing industries able to offer higher pay. Wage growth remained widespread, though an easing was reported in several districts. Some businesses said elevated inflation and higher costs of living were pushing wages up, coupled with upward pressure from labor market tightness. Contacts expect wage growth to continue as higher pay remains essential for retaining talent in the current environment.

This article originally appeared on federalreserve.gov. Use this link to see the full article: Beige Book – October 19, 2022