Fed's Beige Book Warns Of Declining Auto Sales, Sees Rising Benefit Costs Limiting Wages

Tyler Durden's picture

While the Fed's traditionally drab Beige Book is routinely ignored by the market, especially on blockbuster days like today when Janet Yellen turns dovish again and then speaks for nearly 4 hours in the Senate, this time there were several notable highlights in the just released July edition, not least of all the apparent downgrade of the low end of overall economic activity, which for the first time described the pace of growth as "slight to moderate" versus its staple "modest to moderate." 

Of note, while the Fed described consumer spending as "rising across a majority of Districts, led by increases in non-auto retail sales and tourism" it did caution that there appears to be "some softening in consumer spending, particularly in auto sales which declined in half of the Districts." Ironically, contrary to what the Fed reports every week in its H.8 statement where C&I loan growth is virtually unchanged on an annual basis, it said that "loan demand was steady to increasing in most Districts." Perhaps in poke at Trump's plans to revitalize the coal industry, the Fed also remarked that "coal production remained sluggish although higher than year-ago levels."

Discussing the most sensitive topic for the Fed, employment and wages, the Beige Book noted that while "most of the nation maintained a modest to moderate pace of expansion, although the Atlanta and St. Louis Districts noted flat employment levels." On the whole, however, labor markets tightened further, particularly in the construction and IT sectors. The Fed also observed that there were reports of a shortage of qualified workers across a broad range of industries "which had limited hiring." Apparently, it has still not dawned on anyone that one can overcome such shortages by raising wages.

On the topic of prices, the Fed noted that several Districts reported higher construction materials costs and freight prices. It also warned that "low agricultural prices were causing stress for some farmers, although some food retailers reported improved margins due to lower commodity prices." Meanwhile, not surprisingly, "home prices continued to increase in most Districts" while "retail prices held steady or slightly increased."

Finally, below are some of the more notable anecdotes by region:

Boston:

  •  A manufacturer of cardboard boxes was hiring additional workers without raising wages, but noted that finding qualified workers was difficult because production jobs increasingly involve using computers
  • A cardboard box manufacturer reported 10 percent year-over-year growth resulting from increased e-commerce

New York:

  • Broadway theater attendance and revenues were reported to be fairly strong in May and June
  • Broadway theaters noted rising ticket prices, with the average price up 10-15 percent from a year earlier

Philadelphia:

  • Staffing contacts reported spending more time and money on recruiting labor and refilling positions after the initial hire quit, sometimes after just a few days. Workers appear to have less loyalty to the job, and more job-hopping is showing up on résumés

Cleveland:

  • Freight haulers mentioned difficulty recruiting enough qualified drivers despite increasing driver wages recently
  • Freight haulers saw increased demand from oil and gas and strong demand from construction material producers

Richmond:

  • A few firms reported increased productivity resulting from recent new equipment purchases, and they expected further efficiency gains once employees were trained on operating the equipment
  • A few contacts in D.C. and Maryland cited concerns over slowing federal procurement spending

Atlanta:

  • Firms continued to deploy various tactics in an effort to find and develop pipelines of talent and retain workers; for example, developing partnerships with workforce development entities, schools, and military bases, expanding internal and external training and apprenticeship programs, strengthening recruiting efforts, and seeking out retirees to return to work
  • Firms continued to explore or deploy technology as viable future replacements for labor, especially in hard-to-fill jobs

Chicago:

  • A staffing firm that primarily supplies manufacturers with production workers reported a slight decline in billable hours

St. Louis:

  • Manufacturing contacts in Louisville and Memphis reported difficulties finding experienced or qualified employees, with some citing candidates’ inability to pass drug tests or to consistently report to work
  • A science and technology contact reported that rising costs of benefits have limited increases in wages

Minneapolis:

  • Average wages for 18 Minnesota construction unions saw annual increases of between 3.3 percent and 5 percent in recent three-year contracts negotiated in May

Kansas City:

  • Restaurant contacts reported slight declines in both input and selling prices

Dallas:

  • Rail cargo rose, led by strong gains in shipments of fracking sand and grains, although shipments of petroleum products and motor vehicles continued to decline

San Francisco:

  • Wage pressures for skilled software engineers intensified further as competition for programmers with experience in cybersecurity and cloud computing remained fierce
  • Contacts reported that they increasingly filled job openings with older workers who were reportedly seeking health-care benefits or supplemental income
  • Residential construction activity continued to be strong in much of the District, slowed only by a lack of available land and labor

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realmoney2015's picture

Wages are not keeping up with inflation. We all know this, but don't always fully understand it. Our minimum wage would be $49/hr if we had real money: https://m.facebook.com/story.php?story_fbid=816047088569440&substory_ind...

Gold holds it's value and cannot be printed out of thin air. The same goes for silver. To help promote real money and educate on the evils of the Federal Reserve, we sell candles with silver coin prizes. 

Enter to win a 1oz Gold Eagle (est value $1200+) when you buy a candle with a silver coin prize: www.scentsaverscandles.com

When we go back to real money, most of our problems will greatly improve. EndtheFed!

Delving Eye's picture

"The Fed also observed that there were reports of a shortage of qualified workers across a broad range of industries 'which had limited hiring.'"

Why hire people? Robots are so much cheaper -- and never request parental leave! [sarc]

Stormtrooper's picture

Yeah, but robots consume a lot of very expensive grease to feed their habits.

gruden's picture

 A manufacturer of cardboard boxes was hiring additional workers without raising wages, but noted that finding qualified workers was difficult because production jobs increasingly involve using computers

 

The key is in that sentence right there.  They want workers with a higher level of skill, but want to pay wages for lower skilled workers.

I always love it when companies say "We can't find qualified workers" but the part they leave off is "...for the price we're willing to pay."

Maybe the employment market is turning into a big illiquid market.

Sonny Brakes's picture

Show us the money and 95 million working age people will start participating in the workforce and also cut taxes on people who actually have to labor for their earnings.

junction's picture

Of course, the solution to the labor problem is to bring in tens of thousand of "Syrians" into the USA, non-English speaking refugees whose job skills are limited to dope dealing, strong arm robbery and knowledge of Sharia law.  That was Hillary's plan before she managed to lose the election. 

troubadourcapital's picture

Ie "we're going to be cautious on rate hikes forever"

Gordon_Gekko's picture

The Fed can take their beige book and it SHOVE IT up their ass.

Juggernaut x2's picture

Would it then be called The Brown Book?

Fartboxbuffet's picture

Looks like it has already been up in barry obamas bum already

Cordeezy's picture

so should I wait till prices fall if I want to buy a new car?

 

www.escapeamazon.com

 

 

Sonny Brakes's picture

You should maybe consider boycotting the car business for the time being. Haven't they cost the taxpayer enough already. Let them go bankrupt then someone will come along and buy the pieces and turn it into a profitable company.

NotApplicable's picture

I bought my last new car in 2002, which I still own.

Batman11's picture

Hollowing out the West and building the Asian Century.

The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

Purchasing power = wages – (taxes + the cost of living)

The minimum wage must cover the cost of living.

Maximising profits requires low wages.

The cost of living is very high in the West, which makes it a home for high end business where a lot of value is added and high wages can be paid.

Everything else is more profitably done abroad apart from low end service sector jobs that must be done locally.   

The cost of living effect is greatest in the US (where it’s very high) and the US is seeing its middle class disappear the fastest.

Anteater's picture

...

Sees Rising New Car Prices Limiting Sales

When I graduated college a decent new car was $2500 and a new house was $25,000.

Today, 45 years later, a basic new car is $25,000 and a 'starter-home' is $250,000.

Over that same time period, I went from $11 an hour, to max out at $48.50 an hour.

10x prices rise -versus- 4.4x wages rise. Ipso facto all you Ziopigs: Markets ... crash.

rejected's picture

When I graduated college a decent new car was $2500 and a new house was $25,000.

Yea, but today we have all the necessities,,, internet! Digital Radio! Remote Start! 24inch wheels! TeeVee's!  Phones!

Houses have the internet of things so you can monitor the refrigerator temp. from work! turn off the coffee pot! turn on the oven!  Watch your darlings take a shower in case they might slip and fall! Open the garage door from the freeway! Unlock the house from the driveway! Adjust temp. of each room from work!  All from your iPhone for only $200 per month.

Does all those important things that eliminate stress while at work stocking shelves. Ask a millennial,,, they know all about eliminating stress.

SDShack's picture

Who needs archaic things like cars and homes when the iphone8 is coming out?

Sonny Brakes's picture

Unfortunately, this reality is only acknowledged by people when it becomes their turn to take it up the ass. Until then the band keeps playing and the fat lady is kept on standby.

redtie's picture

I noticed a lot of car dealerships are now renting cars. I don't know if this is new or not? Seems odd

redtie's picture

New car dealerships