Supply chain snags, hiring difficulties and uncertainty driven by surging COVID-19 cases hindered economic activity across the country in September, according to a Wednesday report from the Federal Reserve.
In the latest edition of the Fed’s “Beige Book,” the monthly summary of economic conditions in all 12 reserve bank districts, officials reported widespread difficulties meeting intense demand.
While some regions fared better than others, they faced similar obstacles: The delta surge left businesses scrambling to hire from a smaller pool of workers and keep up with steadily rising consumer spending. That pressure has pushed both wages and prices higher as shortage of workers in transportation and deep backlogs fuel inflation.
“Employment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labor growth was dampened by a low supply of workers. Transportation and technology firms saw particularly low labor supply, while many retail, hospitality, and manufacturing firms cut hours or production because they did not have enough workers,” the report read.
The intense demand for workers has also pushed wages and turnover rates considerably higher, particularly in the service sector and industries where workers long complained of poor pay and brutal conditions. There were more than 10 million open jobs in August and the proportion of workers who left their jobs voluntarily rose to a record level, according to the Labor Department.
“Transportation and technology firms saw particularly low labor supply, while many retail, hospitality, and manufacturing firms cut hours or production because they did not have enough workers,” the report read, highlighting child-care issues, COVID-related absences and vaccine mandates as highly cited factors.
“Firms reported increasing starting wages to attract talent and increasing wages for existing workers to retain them,” the report continued. “Many also offered signing and retention bonuses, flexible work schedules, or increased vacation time to incentivize workers to remain in their positions.”
The U.S. added just 194,000 jobs in September while wages grew 0.6 percent on the month and consumer prices rose 0.4 percent, according to the Labor Department. Annual inflation lingered at 5.4 percent, the highest level since the 1990s.
President BidenJoe BidenGOP eyes booting Democrats from seats if House flips Five House members meet with Taiwanese president despite Chinese objections Sunday shows preview: New COVID-19 variant emerges; supply chain issues and inflation persist MORE and some Federal Reserve officials cede that while inflation has run higher and longer than they had anticipated, they believe it will fade once the US recovers from the delta shock. But some moderate Democrats have grown increasingly concerned about rising prices, particularly as Republicans attempt to blame Biden and Democrats for the economic headwinds with the midterm elections looming.
Treasury Secretary Janet YellenJanet Louise YellenBlowing up the Death Star would cause an economic crisis (and other reasons employers shouldn't pay off workers' college debt) Buttigieg has high name recognition, favorability rating in Biden Cabinet: survey Biden's spending binge makes Americans poorer, just before the holidays MORE argued in an interview aired Wednesday that while small businesses may feel higher wage pressures than the mega-retailers who raised their minimum wages to $15 or above, the upward pressure on wage growth and improvements in working conditions were long overdue.
“They may have to pay more and that will be part of the adjustment. But this is something that's good for workers,” Yellen said.
“Many of the service sector workers have suffered from chronically low wages and from working conditions and benefits that leave them working — and this is true particularly of childcare workers, a good share of them really have to be on public assistance because they earn so little,” she continued.