Amid a modest expansion of economic activity, employers reported that wage growth continued to accelerate for lower-skill workers, according to the Federal Reserve Bank of Atlanta Beige Book of economic conditions in the Sixth District.
The Sixth Federal Reserve District includes Alabama, Florida, and Georgia and parts of Louisiana, Mississippi, and Tennessee.
Published October 16, the Beige Book notes that across various industries, “there was growing dialog about increasing minimum hourly wages to $15 per hour.” Broadly, firms reported that a shortage of available workers is the biggest constraint to growth, continuing a trend of the past couple of years.
Some companies also reported rising nonlabor input costs, particularly for products affected by tariffs. As the power to pass along rising costs to customers via higher prices remains generally limited, some businesses were exploring other ways to maintain profit margins.
Meanwhile, the Atlanta Fed’s Business Inflation Expectations (BIE) survey showed unit costs rose 1.9 percent from September 2018 to September 2019, and survey respondents expect costs to climb 2 percent over the next year, in line with the Federal Reserve’s inflation objective. (BIE survey data collected after the Beige Book was compiled indicate that inflation expectations are down slightly to 1.8 percent in the coming year.)
Regarding consumer spending, which accounts for about two-thirds of the nation’s economic activity, retailers remained concerned that heightened geopolitical uncertainty might make shoppers cautious during the upcoming holiday season.
In other economic sectors, the Beige Book reported:
- Tourism: Business remained mixed. The fall tourism season began softer than expected, with year-over-year declines in hotel occupancy and average room rates in Louisiana and Florida. On the other hand, contacts in Alabama and Georgia reported healthy leisure and business travel bookings.
- Home sales: On a month-over-month and year-over-year basis, home sales increased. Demand remained strongest in the more affordable price segments, where inventory remained limited.
- Manufacturing: Contacts reported a rebound since the last Beige Book reporting period. New orders and production levels increased notably.
- Banking: Financial institutions reported stable margins and positive, though slowing, loan growth.
The October Beige Book reporting period covers the middle of August through the end of September. The Fed issues the Beige Book before each meeting of the rate-setting Federal Open Market Committee, which is next scheduled to meet October 29 and 30.
Charles Davidson
Staff writer for Economy Matters