Labor market difficulties are top challenges, but wage increases leveling off at some firms
June 02, 2022
Companies tend to cite labor market difficulties as their greatest challenge, according to latest US Federal Reserve Beige Book report released Wednesday. Worker shortages forced many firms to operate below capacity. However, some companies noted wage increases were leveling off and some firms are targeting “Covid wage premiums.”
“The hiring outlook was mixed, as some contacts expected labor market tightness to ease, and others expected persistent labor shortages,” according to the Boston Federal Reserve District.
Meanwhile, the St. Louis Federal Reserve District reported a “brain drain” caused by remote work, wherein coastal firms were hiring workers in the district at higher wages than local employers were willing to pay.
After labor market difficulties, companies’ next top concern was supply chain disruptions. Other concerns were inflation, the Russian invasion of Ukraine and disruptions caused by Covid-19.
Overall, the report said US economic growth continued, although four of the Federal Reserve Districts noted the pace of growth had slowed.
Here are some select comments on staffing and labor from the report:
- “Although upward wage pressures persisted for most positions, some employers sought to reverse ‘Covid wage premiums’ but faced resistance from workers seeking compensation for inflation,” according to a staffing firm contacted in the Boston district.
- “A New York City staffing agency noted that demand for workers has remained strong across the board, despite recent financial market turmoil,” the New York district reported. “An upstate staffing agency, however, suggested that the labor market, while still quite strong, had become less frothy.”
- “Employers and staffing firms tended to describe hiring and retention of employees as their biggest challenge,” according to the Philadelphia Federal Reserve. “Firms that can’t or won’t raise their starting wage reported few applicants and high turnover.”
- “Individuals moving through the labor market were mainly looking for better pay,” according to the Philadelphia district.
- “Staffing firms reported increased interest in direct hires over temporary workers in recent weeks,” according to the Dallas district.