Tighter labor markets across the U.S. are prompting many companies to increase pay for workers, but wage growth is still "modest" in most of the 12 Federal Reserve districts, according to a new report from the Fed.
The central bank's latest Beige Book report, an anecdotal summary of Fed officials' conversations with business contacts in recent weeks, found that businesses are continuing to report difficulty in finding workers, particularly in skilled trades.
Investors worried earlier this year that a pick-up in wage growth would lead to more rate hikes from the Fed, which is expected to raise rates three or four times in total this year. But so far, Fed officials have noted that wage figures have remained subdued.
Overall prices "rose modestly" in most Fed districts, lining up with a recent strengthening in inflation data. The transportation, construction and manufacturing sectors saw "upward pressure on prices," with a few districts saying that "reports of rising material costs were becoming more common."
Overall, the local economies of the 12 Fed districts continued expanding moderately over the period, although the Dallas Fed district "sped up to a solid pace" in growth. More than half the districts said they saw a pick-up in manufacturing activity, contributing to increased freight volumes for transportation companies.
Business contacts again said they had some concerns over ongoing U.S. trade negotiations with other countries, but "outlooks for near-term growth were generally upbeat."
