Economic growth in recent weeks ranged from “slight to moderate” across the U.S. central bank’s regional districts as wages and inflation remained generally subdued, a Federal Reserve survey showed.
The bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through June 30, continued to raise questions over why a tight labor market is failing to stimulate broader wage and price increases.
“The majority of districts expected modest to moderate gains” in the economy in coming months, according to the report, released July 12 in Washington. Employment increases maintained a “modest to moderate” pace while prices “continued to rise modestly in the majority of districts.”
The Fed has raised interest rates three times in the past year, though officials have begun to diverge over whether flagging inflation should prompt a pause in hiking.
Projections from Fed officials published in June showed the Federal Open Market Committee anticipates raising interest rates one more time in 2017. The FOMC has also indicated it plans to begin reducing the central bank’s balance sheet this year, which could cause monetary conditions to tighten further.
Districts including St. Louis, Minneapolis and Dallas reported companies finding it difficult to fill open positions due to a shortage of qualified candidates.
“Wage pressures generally trended with employment conditions, and rising wage pressures were noted among both low- and high-skilled positions,” the report said.
Atlanta reported that a tightening labor market caused firms to “explore or deploy technology as viable future replacements for labor, especially in hard-to-fill jobs.” Philadelphia said “workers appear to have less loyalty to the job, and more job hopping is showing up on resumes.”
Still, overall wages “continued to grow at a modest to moderate pace in most districts,” the report said.
Unemployment inched up to 4.4% in June after hitting a 16-year low of 4.3% in May. Despite that, the Fed’s preferred gauge of inflation, after stripping out food and energy, rose just 1.4% in the 12 months through May.
Fed Chair Janet Yellen said in congressional testimony earlier July 12 that U.S. central bankers are monitoring “uncertainty” about the low inflation rate. She reiterated her view that the economy will continue to expand in coming years, which should allow policy makers to keep raising interest rates.