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Businesses Face Higher Wages, but Inflation Remains Modest: Fed

Published 03/03/2021, 02:05 PM
Updated 03/03/2021, 02:24 PM
© Reuters.

© Reuters.

By Yasin Ebrahim

Investing.com – Economic growth continued at a modest pace, and businesses are likely to face a pickup in wages over the next several months, but overall inflation will likely remain steady, according to the Fed's Beige Book released Wednesday. 

The central bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Feb. 22, showed the U.S. economic and labor market growth as well as inflation remained modest even as the distribution of vaccines picked up pace.

"Most Districts reported that employment levels rose over the reporting period, albeit slowly ... with supply shortages [the] most acute among low-skill occupations and skilled trade positions. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the next several months," according to the Beige Book.

The update on the labor market comes just as data on Wednesday showed fewer than expected jobs were created in the private market, tempering investor optimism somewhat ahead of the nonfarm payrolls report due Friday. 

The impact of faster wage growth, however, is not expected to translate into a faster pace of inflation at time when input costs are rising moderately, led by steel and lumber prices as many retailers are not able to pass prices through to the consumer.

"Several Districts reported modest wage increases for high-demand positions with many also noting upward pressure on wages to attract and retain employees. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the next several months," the Beige Book showed. 

The outlook on the consumer, the backbone of the U.S. economy, remains murky at best amid ongoing Covid-19 restrictions. 

"Reports on consumer spending and auto sales were mixed. Although a few Districts reported slight improvements in travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing COVID-19 restrictions," according to the report.

Latest comments

employers just gonna take that on the chin? or will your dollar buy less? hmmmm....
The Fed is  not a credible source. Take whatever they say and the opposite is often true.
Tight labor market nobody wants to work or needs to work. Can't compete with unemployment. Whole thing is going to collapse soon. Fed will have buy the 30 year Bond to control yields but they have printed too much " money" so they are screwed.
Wow, if 15-20% increase in gas prices and 200% in building materials is modest, I wonder what major inflation looks like?
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