Labor shortages and supply chain disruptions are crippling businesses across the country as the economic recovery from the coronavirus crisis accelerates.
The pace of recovery picked up in April and May as consumer spending rebounded along with higher vaccination rates and looser social distancing measures, according to the Federal Reserve’s Beige Book report, which provides anecdotal evidence collected by regional central bank counterparts on health. One of the largest economy in the world.
Companies have struggled in some cases to meet this demand, however, due to difficulties in obtaining materials and personnel.
“Manufacturers reported that widespread shortages of materials and labor coupled with delays in delivery made it difficult to get products to customers,” the report said. Similar challenges persisted in construction. Homebuilders have often noticed that strong demand, buoyed by low mortgage interest rates, has outpaced their ability to build, prompting some to limit sales.”
Labor shortages were also widespread, with nearly all regions represented in the report citing their impact on employment and broader job gains.
“It has remained difficult for many companies to hire new workers, especially low-paid hourly workers, truck drivers, and skilled tradespeople,” she said. “The lack of job candidates has prevented some companies from increasing production, and less commonly has led some companies to reduce their hours.”
While the report noted that an “increasing number” of companies were offering benefits including signing bonuses and higher starting salaries for incumbent positions, wage growth overall was “moderate.”
“Contacts have expected labor demand to remain strong, but supply is constrained in the coming months,” the report added.
The Beige Book was released at a critical point for the US economy and its top policymakers, as concerns are growing that recent inflationary pressures may be more persistent than many expect.
Wednesday’s report acknowledged that costs had risen “across the board,” with gains most notable in raw materials for construction and manufacturing in particular.
“However, boosting demand has allowed some companies, especially manufacturers, builders and carriers, to pass on many of the cost increases to their customers,” the report said. “Looking forward, the contacts expect to face cost increases and higher rates in the coming months.”