Beige Book
For use at 2:00 PM EDT
Wednesday
September 8, 2021
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
August 2021
Federal Reserve Districts
Minneapolis
Boston
New York
Chicago
San Francisco
Kansas City
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
Cleveland
St. Louis
Philadelphia
Richmond
Atlanta
The System serves commonwealths and territories as follows: the New York Bank serves the
Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
This report was prepared at the Federal Reserve Bank of New York based on information collected on
or before August 30, 2021. This document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
National Summary
Boston
1
A-1
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.
B-1
What is the purpose of the Beige Book?
First District
New York
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
What is the Beige Book?
L-1
The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
many ways the Federal Reserve System engages with businesses and
other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book
can complement other forms of regional information gathering. The
Beige Book is not a commentary on the views of Federal Reserve
officials.
How is the information collected?
Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other
sources. Contacts are not selected at random; rather, Banks strive to
curate a diverse set of sources that can provide accurate and objective
information about a broad range of economic activities. The Beige
Book serves as a regular summary of this information for the public.
How is the information used?
The information from contacts supplements the data and analysis used
by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative nature of the
Beige Book creates an opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in
the available economic data. This information enables comparison of
economic conditions in different parts of the country, which can be
helpful for assessing the outlook for the national economy.
The Beige Book does not have the type of information I’m looking
for. What other information is available?
The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
here, links to each of the Federal Reserve Banks are available here,
and a summary of the System’s community outreach is available here.
In addition, Fed Listens events have been held around the country to
hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.
National Summary
The Beige Book ■ August 2021
Overall Economic Activity
Economic growth downshifted slightly to a moderate pace in early July through August. The stronger sectors of the economy of late included manufacturing, transportation, nonfinancial services, and residential real estate. The deceleration in
economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety
concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions. The other sectors of the
economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as
opposed to softening demand. In particular, weakness in auto sales was widely ascribed to low inventories amidst the
ongoing microchip shortage, and restrained home sales activity was attributed to low supply. Growth in non-auto retail
sales slowed a bit in some Districts, rising at a modest pace, on balance, across the nation. Residential construction was
up slightly, on balance, and nonresidential construction picked up modestly. Trends in loan volumes varied widely across
Districts, ranging from down modestly to up strongly. Reports on the agriculture and energy sectors were mixed across
Districts but, on balance, positive. Looking ahead, businesses in most Districts remained optimistic about near-term prospects, though there continued to be widespread concern about ongoing supply disruptions and resource shortages.
Employment and Wages
All Districts continued to report rising employment overall, though the characterization of the pace of job creation
ranged from slight to strong. Demand for workers continued to strengthen, but all Districts noted extensive labor shortages that were constraining employment and, in many cases, impeding business activity. Contributing to these shortages were increased turnover, early retirements (especially in health care), childcare needs, challenges in negotiating job
offers, and enhanced unemployment benefits. Some Districts noted that return-to-work schedules were pushed back
due to the increase in the Delta variant. With persistent and extensive labor shortages, a number of Districts reported
an acceleration in wages, and most characterized wage growth as strong—including all of the midwestern and western
regions. Several Districts noted particularly brisk wage gains among lower-wage workers. Employers were reported to
be using more frequent raises, bonuses, training, and flexible work arrangements to attract and retain workers.
Prices
Inflation was reported to be steady at an elevated pace, as half of the Districts characterized the pace of price increases as
strong, while half described it as moderate. With pervasive resource shortages, input price pressures continued to be widespread. Most Districts noted substantial escalation in the cost of metals and metal-based products, freight and transportation
services, and construction materials, with the notable exception of lumber whose cost has retreated from exceptionally high
levels. Even at greatly increased prices, many businesses reported having trouble sourcing key inputs. Some Districts reported that businesses are finding it easier to pass along more cost increases through higher prices. Several Districts indicated
that businesses anticipate significant hikes in their selling prices in the months ahead.
Highlights by Federal Reserve District
Boston
New York
Economic activity in the First District expanded at a
modest to strong pace over the summer of 2021. Contacts reported higher prices and wages but complained
more about an inability to get supplies and to hire workers. Contacts were optimistic and hoped supply issues
would ease in 2022.
Growth in the regional economy moderated, though
contacts remained optimistic about the near-term outlook. Employment and wages increased, with businesses reporting widespread labor shortages. Tourism leveled off, and service-sector businesses reported some
deceleration in activity. Input price pressures remained
widespread, and more businesses have raised or plan to
raise their selling prices.
1
National Summary
Philadelphia
St. Louis
Business activity continued at a moderate pace of
growth during the current Beige Book period – still below
levels attained prior to the pandemic. The rise of Delta
variant cases has trimmed growth in some sectors, while
labor shortages and supply chain disruptions continued
apace. Overall, wage growth increased to a moderate
pace, while prices continued growing moderately and
employment continued to grow modestly.
Economic conditions have continued to improve at a
moderate pace since our previous report. Across all
industries, contacts are concerned about the Delta variant and its economic impact. Contacts continued to
report that labor and material shortages. Overall inflation
pressures remain elevated, but firms reported varying
degrees of pass-through to customers.
Minneapolis
Cleveland
Economic activity grew solidly, but supply constraints
limited many firms’ ability to meet demand. Staff levels
increased modestly amid intense labor shortages. Reports of rising nonlabor costs, wages, and prices continued to be widespread. Firms expected demand would remain strong in the near term, but they were less optimistic that labor and supply challenges would abate enough
to ease the upward pressure on wages and costs.
The District economy saw moderate growth despite
continued inventory shortages and higher prices. Employment grew strongly but hiring demand continued to
outstrip labor response by a wide margin. Consumer
demand remained strong, leveraging growth in services,
tourism, and manufacturing. Drought took a growing toll
on agriculture, though higher prices benefitted farmers.
Minority and women-owned business enterprises saw
moderate growth in activity.
Richmond
Kansas City
The regional economy expanded moderately, but many
firms faced shortages and higher costs for both labor
and non-labor inputs. Port and trucking volumes picked
up from already high levels, but manufacturers and services firms experienced delays and long lead times for
goods. Employment rose moderately as labor shortages
and wage increases were widely reported. Price growth
picked up and was robust compared to last year.
Economic activity continued to grow at a moderate pace
through August. Demand remains elevated for most
businesses, and a majority of contacts expect activity to
remain elevated amid the recent surge in COVID cases.
Wages grew at a robust pace, but labor shortages persist. As a result of widespread drought, pasture and
range land in several states was in poor or very poor
condition.
Atlanta
Dallas
Economic activity expanded moderately. Labor markets
improved and wage pressures became more widespread. Some nonlabor costs rose. Retail sales increased. Leisure travel was strong and hotel occupancy
levels rose. Residential real estate demand remained
solid. Commercial real estate conditions were steady.
Manufacturing activity expanded. Banking conditions
were stable.
The District economy expanded at a solid rate, with
broad-based growth across sectors. Employment growth
was robust, with a pickup seen in the service sector.
Wage and price growth remained elevated amid widespread labor and supply chain shortages. Outlooks
stayed positive, though surging COVID-19 cases has
added uncertainty to outlooks.
San Francisco
Chicago
Economic activity in the District expanded moderately.
Hiring activity intensified further, as did upward pressures on wages and inflation. Retail sales increased
modestly, while conditions in the services sector deteriorated somewhat. Activity in the manufacturing and agriculture sectors increased slightly. Residential construction edged down somewhat, while lending activity remained largely unchanged.
Economic activity increased moderately. Employment increased strongly, manufacturing grew moderately, business spending was up modestly, construction and real
estate rose slightly, and consumer spending decreased
slightly. Wages and prices increased strongly while
financial conditions slightly improved. There was some
retreat in prospects for agricultural income.
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Federal Reserve Bank of
Boston
The Beige Book ■ August 2021
Summary of Economic Activity
Business activity continued to grow at a modest to strong pace in the First District in the Summer of 2021. Contacts
across a wide cross-section of the economy reported strong demand. Residential real estate markets across the region
continued to experience exceptional strength characterized by high prices and low inventories. One contact characterized the current situation in the semiconductor industry as a “golden age.” Even in-store retail and restaurants in the
region were upbeat. The main constraint on sales appeared to be shortages of parts and logistics problems. Supply
issues have translated in some pricing pressure but mostly disrupted delivery of products and services. Labor markets
remained very tight but employers complained more about unfilled openings than about high wages. Firms continued to
be optimistic. Some contacts thought increases in demand were temporary but have revised their views.
pandemic levels and revenue increased last quarter from
the prior quarter, but year-over-year sales reflect a modest decline relative to the very strong sales last summer.
In-store sales of home goods and apparel continued to
rebound since the spring with same store sales up nearly
20 percent relative to summer 2019 in some cases.
Employment and Wages
Contacts continued to report tight labor markets with
strong labor demand but limited labor supply and employment growth. Reasons varied. Some attributed this
to expanded Unemployment Insurance (UI) benefits but
others said that hiring was equally difficult for high wage
workers and workers in states which had discontinued
expanded UI. Contacts indicated that labor market
tightness was most felt on the extensive margin, complaining more about an inability to hire at all versus
having to pay higher wages. Some contacts said that
pay equity across workers made it difficult to raise wages
for new hires. Salaries for specific occupations have
gone up with one contact saying that pay for logistics
specialists had doubled since the start of the pandemic.
Tourism and hospitality respondents noted strong restaurant sales throughout the summer, but they reported
disruptions related to COVID-19 with some restrictions
reinstated since the last round. Menu prices have continued to rise since the spring as food, delivery, and labor
costs have all continued to increase in recent months.
Higher menu costs have resulted in modestly larger tips
for front of the house staff, and efforts have been made
to increase wages across restaurants to attract more
workers.
Prices
Contacts reported generally higher input prices but, as
with labor, they were mostly concerned about getting the
supplies they needed versus the price. Firms did raise
prices to offset higher costs but also said they tried to cut
costs to maintain margins. Restaurants indicated that
they were raising prices to cover higher costs.
Manufacturing and Related Services
Most of our contacts reported higher sales versus the
same period one year ago. Firms connected to the
semiconductor industry reported exceptional strength
with one referring to the current period as a “golden age”
for the industry. A furniture manufacturer said sales
were high by normal standards but low relative to the
summer of 2020. Several contacts said that supply
constraints limited growth. Specifically, they claimed that
shortages and supply chain disruptions had a relatively
small effect on prices but mostly affected their ability to
make promised deliveries on schedule. Almost all con-
Retail and Tourism
Retail contacts noted continued strength in apparel,
home decor, salvaged goods, and online sales of home
furnishings. Travel restrictions along the Canadian border have limited sales for some contacts. Online sales of
home furnishings have remained well above pre-
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Federal Reserve Bank of Boston
tacts mentioned that logistics continued to be a problem.
Most contacts said that they had limited price increases
to customers and had dealt with higher input prices by
cutting costs and increasing productivity. Hiring remained challenging. Contacts reported wage pressure
especially for specific occupations. One contact said
that pay had doubled for logistics specialists. Several
contacts reported revising capital expenditures higher
because of strong demand since the start of the pandemic. Contacts were generally optimistic although
some had made downward revisions to their forecasts
due to shortages of parts. Contacts expected supply
disruptions to ease in 2022.
continuing to offer some non-rent concessions. Sales
activity continues to be limited in the office market, as
office property owners prefer to wait rather than discount
or sell their properties. Retail real estate activity is mixed
with strong demand for grocery- and gas-anchored retail
along with lifestyle retail and experiential restaurants.
Contacts still hold generally optimistic outlooks, but also
expressed greater uncertainty regarding the office and
retail markets.
Commercial real estate lending and investment have
been characterized by highly competitive and loose
market conditions for warehouses, multi-family housing,
and life sciences products. Banks and institutional investors, that are flush with cash and under pressure to
invest, are driving robust price increases. In competitive
final bidding rounds, price increases have been 10 to 20
times greater than in normal market conditions. Loan
and capitalization rates alike have compressed by a
further 5 to 25 basis points from the previous cycle.
Staffing Services
Staffing firms reported strong performance during the
summer months, with quarterly increases as high as 20
percent following a strong 2021Q1. Demand for labor
remains high across all sectors and supply is tight.
Contacts said clients were lowering their required qualifications and experience for job candidates and offering
on-the-job training and opportunities for upward mobility.
Reliability stands out as the primary concern for these
employers. Pay rates remain elevated, and several
contacts reported bidding wars to attract qualified candidates. While several contacts cited continued UI benefits
as a cause of the worker shortage, other contacts cited
childcare options as the primary obstacle. Pandemicrelated health concerns remained an issue. Contacts
were generally optimistic about their performance the
rest of the year, with several firms expecting growth in
labor supply as increased recruitment efforts continue
and UI benefits expire.
Residential Real Estate
Low inventory continued to push prices upward in the
First District’s residential real estate markets in July.
Sales levels for single family homes were unchanged or
lower year-on-year and sales of condos were unchanged
or slightly up. Inventory is down by double digit percentages for all reporting markets year-over-year but the
inventory declines have moderated. Median sales prices
are higher for all types of residential real estate but price
growth has slowed slightly since last cycle. Contacts
expect high demand to continue to outpace supply into
the fall and winter for as long as mortgage rates remain
low. ■
Commercial Real Estate
Commercial real estate sales and leasing in the First
District remains mixed with strength in industrial and life
science while uncertainty continues to surround retail
and office space. The industrial and life sciences markets continue to be characterized by high leasing demand with high rents and near-zero vacancy levels. Lack
of availability has led to reductions in industrial and life
science leasing activity in part of the district. Development and construction activity in these sectors have
remained strong throughout the district but continue to
be affected by high construction costs, and many new
projects now incorporate an “escalation factor” into budgets. Contacts described slow and even “anemic” conditions in the office market—departing from greater optimism during the previous calling cycle. Concerns about
the Delta variant has increased uncertainty and many
tenants opt to sign short-term renewals only when necessary. Office rents remained mostly flat, with landlords
For more information about District economic conditions
visit: www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ August 2021
Summary of Economic Activity
Economic growth in the Second District returned to a more moderate pace in the latest reporting period, as the Delta
variant has become more prevalent. Still, contacts continued to express fairly widespread optimism about the business
outlook. The job market has remained exceptionally tight, as firms continued to add workers and raise wages amidst
extensive reports of labor shortages. Input price pressures have continued to broaden, and a large majority of businesses report that they have continued to hike selling prices. Consumer spending has leveled off, reflecting a combination of
decelerating demand and extensive supply bottlenecks. Home sales and rental markets have been strong, while office
markets were steady in much of the District but remained weak in New York City. Construction activity has picked up.
Finally, contacts in the broad finance sector reported modest growth in activity, while regional banks reported steady
loan demand and ongoing declines in delinquency rates.
Employment and Wages
Prices
The job market has remained exceptionally tight, with
businesses continuing to add workers and planning further hiring in the months ahead, but worried about widespread labor shortages. A major New York City employment agency reported an increase in job postings, noting
that employers and job candidates remain far apart not
only on compensation but also on flexibility regarding
hybrid work arrangements. An upstate New York employment agency indicated a slight increase in hiring activity—particularly for salespeople—and also reported ongoing labor shortages, noting that businesses have been
increasingly looking outside the region for candidates.
Firms have continued to report exceptionally widespread
increases in input prices—particularly in the construction,
manufacturing, wholesale trade, and transportation &
warehousing industries. Contacts in all sectors anticipate
widespread input price hikes for the remainder of 2021.
Selling prices accelerated further, with particularly widespread price hikes reported by manufacturers and
wholesalers. Retail prices have risen to varying degrees:
effective prices for both new and used vehicles are up
sharply, while prices for general merchandise have risen
moderately. A sizable share of contacts in all sectors
plan to increase prices over the next six months.
Businesses anticipate further widespread hiring in the
months ahead, especially in the professional & business
services and wholesale trade sectors. In particular, businesses are expected to hire more administrative support
people if and when business travel picks up. Many firms
that have been operating remotely have pushed back a
return to the office from September to later in the year.
Consumer Spending
Consumer spending has leveled off in the latest reporting period. Non-auto retailers reported some plateauing
in activity in recent weeks, though one major chain did
note continued improvement in sales in August, led by
brisk back-to-school spending. In New York City, sales
have continued to trend up, as mask and vaccine mandates have alleviated some safety concerns, but they
remain well below pre-pandemic levels, hampered by an
ongoing dearth of international visitors and office workers. Retailers have grown somewhat less optimistic
about prospects for the remainder of 2021. Consumer
confidence among New York State residents remained
near record highs in July.
Wage growth has picked up further, particularly in the
leisure & hospitality and retail trade sectors. An upstate
New York employment agency noted a sharp increase in
wages, while a New York City agency reported moderate
wage growth. Looking ahead, fairly widespread wage
hikes are anticipated across all major industries.
B-1
Federal Reserve Bank of New York
An increasingly severe shortage of auto inventories has
led to weakening sales of new vehicles in recent weeks.
Dealers perceive no end in sight to the microchip shortage that has severely limited their inflow of new vehicles.
At this point, new cars being delivered to dealers are
largely already spoken for. Sales of used autos have
also weakened somewhat but remain at high levels.
tionally lean, and prices are up fairly dramatically from prepandemic levels and have continued to rise, though bidding wars have become less prevalent and overbids have
become more subdued. In New York City, market conditions have been mixed but mostly stronger. In Manhattan,
prices have trended up but are still down 7 percent from
2019 levels, while inventory remains elevated; sales volume is reported to be 16 percent higher than before the
pandemic. In the rest of the city, conditions are more akin
to suburban markets, with prices at record highs and inventories lean.
Manufacturing and Distribution
Contacts in the manufacturing and wholesale trade
sectors indicated that growth has slowed markedly in
recent weeks, while those in the transportation & warehousing sector noted a pickup in growth. Contacts continued to note that their business has been constrained
by supply disruptions and worker shortages. Looking
ahead to the second half of this year, companies in
these sectors remained widely optimistic about business
prospects, though labor shortages remained a major
concern.
New York City’s rental market has continued to rebound,
with leasing activity reported to be exceptionally brisk and
vacancy rates retreating. Rents have continued to rebound
but are still down 10 percent from early-2020 levels in
Manhattan and down 3-5 percent across the rest of New
York City. Rents have generally rebounded more strongly
on larger than on smaller units. A substantial supply of new
apartments (rental and condo) is currently in development.
Services
Commercial real estate markets have remained mixed
across the District. New York City’s office market has
continued to slacken, with record-high sublet space available and rents still trending down. While some firms, notably
large tech companies, have leased more space, many
others have reduced their footprint in Manhattan or plan to
do so. In suburban markets around New York City, market
conditions have stabilized, with availability rates leveling
off and rents steady to down slightly. Office markets across
upstate New York have shown signs of rebounding.
Service industry contacts reported continued growth in
activity but at a slower pace than in recent months. The
information and leisure & hospitality industries, which
had looked overwhelmingly positive in the prior report,
grew more moderately. Similarly, firms in professional &
business services and education & health services reported moderate improvement. Looking ahead, contacts
in all these sectors continued to express optimism about
business prospects.
Tourism has been mixed but slightly softer, on balance,
since the last report. Across upstate New York, major
outdoor events, such as the state fair, have been well
attended, contributing to a brisk summer tourism season.
But the extension of restrictions on visitors, especially
from Canada, has dampened activity in some areas.
In New York City, a sizable amount of space is currently
under construction, and new construction has picked up for
both office and multifamily structures. Construction sector
contacts expect business to improve in the months ahead
but have continued to express concern about the cost and
availability of materials and labor.
In New York City, rising concerns about the Delta variant
and the extension of federal restrictions on foreign visitors have constrained activity and led to the cancellation
of summer events, such as the Fancy Foods Show and
the Auto Show. Still, as hotels have re-opened, occupancy rates remained above 50 percent, and a number of
major events, such as the U.S. Open and ComicCon, are
still on.
Banking and Finance
Businesses in the broad finance sector indicate that activity has increased moderately since the last report. Bankers
reported a slight pickup in overall loan demand, with increased demand for commercial mortgages but slightly
weaker demand for consumer and commercial and industrial loans. Refinancing activity decreased on net. Credit
standards were reported as unchanged across all categories, while loan spreads decreased across the board.
Finally, delinquency rates continued to improve across all
categories. ■
Real Estate and Construction
Housing markets have been mixed but, on balance,
steady in recent weeks. Sales markets outside New York
City have remained robust, though volume has receded
somewhat—largely reflecting a lack of supply and a
typical summer lull. Inventories have remained excep-
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ August 2021
Summary of Economic Activity
On balance, business activity in the Third District continued to grow moderately during the current Beige Book period;
however, activity in most sectors has not yet returned to pre-pandemic levels. The rate of adults being fully vaccinated
against COVID-19 slowed but rose above 55 percent. Contacts noted that the rise in Delta variant cases has impacted
activity in retail, restaurants, and travel. Meanwhile, supply chain disruptions grew worse. Net employment continued at
a modest pace of growth, while prices, and now wages, grew moderately. About two-thirds of the nonmanufacturers and
less than half of the manufacturers expressed positive expectations for continued economic growth over the next six
months. Optimism has narrowed as the Delta variant has disrupted plant production, delayed a return to many offices,
and increased uncertainty about the success of school reopenings this fall.
Employment and Wages
Over two-fifths of the nonmanufacturing firms reported
higher wage and benefit costs per employee – comparable with pre-pandemic levels. Almost no firms reported
lower compensation. The rate of growth in total compensation that firms expect over the next year has nearly
doubled since last year.
Employment continued to grow modestly overall. The
share of firms reporting employment increases held
steady at one-fifth of nonmanufacturing firms and over
one-third among the manufacturers. Overall, average
hours worked rose for about one-fourth of all firms.
Prices
Hiring and retaining workers remained a challenge for
many firms across all sectors. Contacts at staffing firms
continued to report better candidate flow and are hoping
for greater availability as schools reopen. However,
contacts at other firms tended to report a decline in
applicants per job since May – citing early retirements,
career changes, childcare issues, and enhanced unemployment benefits. Reports of burnout are rising among
workers and owners alike. The ongoing lack of workers
has forced smaller retail and restaurant owners back to
the register, the kitchen, and the dish room.
On balance, prices continued to rise moderately over the
period. The share of manufacturers reporting higher
prices for factor inputs edged down to three-fourths,
while those receiving higher prices for their own products
edged a bit above one-half. However, the share of nonmanufacturers reporting higher prices for their inputs
remained at about one-half, while the share receiving
higher prices from consumers for their own goods and
services edged below one-third.
About two-thirds of the manufacturing contacts reported
they expect to pay higher prices over the next six
months, and slightly more than that expected to receive
higher prices for their own goods.
Wages rose moderately overall – somewhat more so
than in the prior period. Wage pressure remains greatest
for lower-wage jobs. The unusually high degree of labor
market churn makes it difficult for firms to find an attractive wage. Two manufacturing firms reported opposing
results from offering a $20 an hour wage – one noted
improved hiring at all locations, another reported no
applicants.
Looking ahead one year, the prices that firms anticipate
receiving for their own goods and services rose further
still – the expected rate of growth has nearly tripled
among manufacturers since last year and has more than
doubled for nonmanufacturers.
C-1
Federal Reserve Bank of Philadelphia
Manufacturing
cial real estate lending was flat. Credit card volumes
grew moderately – faster than the modest pace during
the same period in 2019.
On average, manufacturing activity continued to grow
moderately. However, net increases of shipments and of
new orders waned further from the prior period’s level.
Firms also reported lower net levels of backlogs and
delivery times, while inventories turned negative. Contacts continued to note strong demand; however, production levels and employment remained below prepandemic levels.
Labor shortages continued and supply chain disruptions
grew worse, according to many contacts. Many firms are
still searching for an acceptable wage, others are waiting
for government benefits to expire, and some continue to
pursue automation where they can.
Bankers, accountants, and bankruptcy attorneys continued to report that very few problems with bad debt have
emerged. Their concerns over personal and small business bankruptcies have waned; however, some still
expect an uptick of small business bankruptcies after
passage of another six months. Contacts continued to
note the value that government assistance provided in
keeping businesses afloat through the pandemic. However, they also noted that some businesses that were in
trouble before the pandemic and were kept alive are
beginning to fail now.
Consumer Spending
Real Estate and Construction
Homebuilders reported a slight drop-off in sales activity
since the spring – attributed to rising prices, limited inventory, and less urgency from buyers. Many builders
now have contracts to build houses that extend well into
2022. However, supply chain problems have worsened
and are expected to continue for another year.
Retailers (nonauto) and restaurateurs continued to report
modest growth. Labor shortages continued, and supply
chain disruptions worsened – prompting one firm to rent
its own refrigerated trucks to deliver food to its restaurant
locations when the large distributors delay scheduled
deliveries. Some contacts also noted a rising number of
belligerent customers.
Existing home sales held steady, and availability remained low, but the market may have cooled a bit.
Sellers still receive multiple offers, but with prices that
are not as high above asking price as before. Contacts
reported that the for-sale inventory ticked up from June
to July (measured as months of supply), and one broker
noted that sellers are currently waiting until the fall to list
their houses.
Auto dealers reported that new car sales fell significantly
as factories have cut production predominantly because
of the ongoing microchip shortage. Contacts opined that
this situation may continue until at least next summer.
Meanwhile, the lack of supply is driving prices (and
margins) higher for new and used cars; the latter continue to sell at high levels.
Construction and leasing activity remained steady for
nonresidential projects. Warehouses, institutional, and
multifamily projects remain strong, while demand for
office space has paused. ■
Tourism contacts noted modest declines in activity as
concerns about the Delta variant rose. Domestic tourism
remained strong at mountain and shore destinations;
however, some business and group bookings were
canceled or postponed.
Nonfinancial Services
Nonmanufacturing activity continued to grow moderately;
however, firms reporting increases in sales or revenues
fell well below half. Moreover, on balance, output remained below pre-pandemic levels. A large servicesector firm noted steady growth and a low rate of nonpayment among its customers.
Financial Services
The volume of bank lending (excluding credit cards) fell
modestly during the period (not seasonally adjusted);
during the same period in 2019, by contrast, loan volumes grew modestly. Once again, commercial and industrial loans contracted significantly, while home equity
lines and other consumer loans fell modestly. Auto lending and home mortgages grew modestly, and commer-
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ August 2021
Summary of Economic Activity
Economic activity grew solidly, albeit at a somewhat slower pace than in the previous reporting period. Customer demand was solid for firms across a broad range of industries. That said, supply constraints limited many firms’ ability to
keep up with growing demand. This challenge was particularly acute for homebuilders, manufacturers, and auto dealers,
many of which reported shortages and delays in receiving key items. Staff levels increased modestly, despite reports of
strong customer demand. Labor shortages remained intense, and many firms raised wages for new hires and current
employees. Reports of rising nonlabor costs and prices were widespread. Firms generally attributed the higher prices to
the persistence of supply chain disruptions and worker shortages. Firms were generally upbeat that customer demand
will remain strong during the rest of the year, but they were less optimistic that labor shortages and supply chain disruptions would abate enough to alleviate some of the upward pressure on wages and input costs.
Employment and Wages
said it had already given five pay raises this year.
Staff levels increased modestly, and many firms commented that it was difficult to fill open positions for a wide
range of occupations and skill levels. Contacts generally
indicated that the flow of job applicants had not improved
in recent months, despite some District states’ early
ending of supplemental unemployment benefits. Businesses also struggled to keep up with the high pace of
employee turnover and retirements. One metalworking
firm remarked that one-fourth of its staff had been with
the firm for three months or less because of high turnover of new employees. Many contacts were pessimistic
about their ability to fully staff up in coming months. One
producer of industrial robots expected it would take four
to five months to hire 20 semi-skilled manufacturing
techs, a timeline which would be far longer than typical.
Prices
Reports of rising nonlabor costs were widespread, and
many firms expected sizeable cost increases in the
coming months. Just over 80 percent of contacts reported that their nonlabor costs had increased in the last two
months, a slightly higher share than in the previous
survey. Contacts highlighted higher costs for a wide
range of inputs, including meat, steel, packaging, electronics, office supplies, and freight services. Cost increases were often attributed to ongoing supply disruptions, which in some cases had worsened. A dairy
farmer said that his food service distributors were now
routinely out of a dozen or more items. These disruptions
caused him to seek alternative suppliers at greater cost.
Reports of firms' raising their selling prices were also
widespread. About two-thirds of respondents raised
prices, a similar share to that of the previous reporting
period. Many contacts indicated they were passing
through higher labor costs to customers, not just higher
costs for materials and freight services as in recent
surveys. Some firms noted they were increasingly using
surcharges to cover higher costs. Contacts are expecting
larger increases in their prices during the next year than
they previously anticipated because of rapid changes to
Reports of wage increases remained widespread. About
two-thirds of survey respondents increased wages during the past two months, the highest share since we
began keeping records in 2016. More so than in recent
surveys, contacts commented that pay increases were
needed, not just to attract new hires, but also to retain
current employees and to prevent poaching. Several
contacts indicated that they were raising wages across
pay grades. Also, several contacts said they were giving
more frequent raises than usual. One trucking company
D-1
Federal Reserve Bank of Cleveland
costs and the longer-than-expected persistence of supply constraints. One freight hauler was told by a truck
producer that all 2022 orders were being canceled and
repriced because costs were changing so quickly.
segments. Demand for industrial space remained robust,
while demand for retail space and office space was
dampened somewhat by the increase in coronavirus
infections and rapidly changing workplace requirements.
Contacts were optimistic that activity would continue to
improve, although some were concerned that frequent
cost increases and shortages of materials could hinder
activity.
Consumer Spending
Consumer spending increased moderately. The spread
of the Delta variant had mixed impacts on high-contact
services. While contacts observed cancelations of group
events and weaker demand for air travel, hospitality
firms that cater to regional leisure customers reported
continued improvement in activity and stronger demand
for local getaways. Demand for goods remained strong.
General merchandisers and apparel retailers said that instore traffic picked up in recent weeks. One department
store noted that early back-to-school sales were stronger
than in 2020 and were in line with 2019 sales as most
schools announced a return to in-person instruction.
Auto dealers noted that demand remained elevated but
that sales dipped as tight inventories and higher prices
deterred some buyers. Contacts were optimistic that
consumer spending would continue to improve in the
coming months, although the spread of the Delta variant
clouded their outlooks for high-contact services.
Financial Services
Banking activity increased moderately, although it cooled
somewhat from that of recent reporting periods. Contacts
noted that demand for auto loans and mortgages remained somewhat elevated even though limited inventories in both markets dampened activity. A few lenders
reported stronger demand for commercial real estate
loans. That aside, business lending was relatively soft,
and some bankers said loan payoffs and cash balances
were high. Contacts reported that delinquency rates for
consumer and commercial loans were still low and that
the number of active forbearance agreements continued
to drop. Looking ahead, bankers expected loan demand
to remain stable in the near term but noted that the
spread of the Delta variant tempered their prior optimism.
Manufacturing
Professional and Business Services
Professional and business services firms continued to
report robust demand. Technology firms experienced
increased activity as clients resumed software investments that had previously been put on hold. Firms also
noted that the labor market’s ongoing recovery led to
heightened demand for human resources- and payrollrelated software. Contacts were optimistic that activity
would remain strong as the economy continues to grow,
although some firms were concerned that the recent
increase in coronavirus infections may begin to dampen
overall economic activity and ultimately demand for their
services.
Manufacturing orders increased strongly across a range
of end-user markets. Many producers said they were
unable to meet demand because of worker shortages
and delayed deliveries of inputs. A sizeable minority of
firms noted that capacity utilization was below desired
levels because of such challenges, and some moved out
their own delivery schedules. Contacts noted some
customers were accelerating their orders in anticipation
of future delays and shortages. Capital expenditures
increased modestly, with firms directing additional
spending towards automation. On balance, manufacturers expected demand to continue to rise in the coming
months.
Freight
Demand for freight services grew modestly from already
high levels. One contact attributed the increased activity
to customers’ adding to their supply stockpiles and some
firms’ storing their products offsite when customers
further down the supply chain were behind schedule.
Several freight haulers reported that shortages of drivers
or equipment led them to turn away some orders. Looking forward, contacts expected demand for freight services to remain elevated. ■
Real Estate and Construction
Housing demand remained robust. However, the limited
supply of homes continued to put upward pressure on
home prices, and homebuilders were concerned that
persistent supply chain disruptions were inhibiting new
home construction. Contacts anticipated that activity
would level off because the intensely competitive buyer’s
market and rapidly rising prices have led some potential
homebuyers to postpone purchasing a home. One real
estate agent predicted that “instead of super-hot, it will
be a warm market where things will start to balance out.”
For more information about District economic conditions visit:
www.clevelandfed.org/region
Nonresidential construction and real estate activity increased moderately, although there was variation across
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ August 2021
Summary of Economic Activity
The regional economy continued to grow at a moderate rate in recent weeks, but firms across a variety of sectors reported constraints to growth. Manufacturing activity picked up moderately, but some manufacturers were unable to keep
up with demand due to shortages of inputs and labor. Ports and trucking companies continued to report strong demand
growth from already high volumes. Retailers reported moderate growth in sales but faced low inventory levels, longer
lead times, and higher costs. Travel and tourism remained strong, largely driven by consumer travel. Home sales
slowed slightly, and more homes came on the market, but the market remained strong overall. Commercial real estate
activity picked up moderately in recent weeks although office vacancies remained high. Reports from financial institutions echoed that demand for mortgages eased but was somewhat offset by moderate commercial loan growth. Nonfinancial services reported little change in recent weeks as several firms cited labor and inventory shortages constraining
growth. Employment rose moderately and demand for workers intensified, giving way to moderate wage growth. Price
growth picked up in recent weeks and was robust compared to a year ago as many firms increased prices in response
to higher costs.
Employment and Wages
Manufacturing
Employment in the Fifth District increased moderately
since our previous report. Demand for workers intensified
with contacts across industries reporting an acute shortage of labor. In several cases, the shortage of workers
constrained growth and led some firms to modify business operations by reducing hours or services. Some
employers noted that the rise of COVID cases due to the
Delta variant led to delays and challenges bringing workers back to the office. Wages rose moderately, on balance, as contacts reported increasing wages to both
recruit and retain workers. One manufacturer noted that
they not only increased starting wages but also offered
guaranteed raises after three and six months.
Fifth District manufacturers saw moderate growth in
shipments and new orders in recent weeks. Furniture,
food, and packaging manufacturers saw especially high
demand, which they were often unable to meet. Inventories of both materials and final products declined. Lead
times continued to lengthen, and many manufacturers of
perishables turned away business. Low and unpredictable supply of inputs as well as labor shortages constrained production. Contacts also noted increasing
difficulty finding transportation, both domestically and
internationally, which was delaying shipments of finished
products as well as arrivals of materials.
Prices
Fifth District ports saw robust growth in volumes since
our last report, mostly driven by imports. Furniture imports were especially strong, along with food, machinery,
and textiles. Auto parts imports showed some strengthening. Ships were delayed arriving at ports but port
operations ran smoothly upon arrival. Rail delays, along
with a chassis and truck driver shortage, left containers
waiting at ports for an extended time before being
shipped inland. An airport contact noted that passenger
planes that had helped with excess imports during the
pandemic are now being used for passenger flights
thereby decreasing the number cargo flights.
Ports and Transportation
Price growth increased moderately in recent weeks and,
compared to a year ago, price growth was robust. According to our surveys, both manufacturing and service
sector firms reported a substantial rise in prices paid for
non-wage inputs in recent weeks, particularly for materials in short supply due to global supply chain disruptions.
Gas and freight prices also rose from already high levels.
Many firms reported raising their prices in response to
higher input costs for materials, energy, transportation,
and labor.
E-1
Federal Reserve Bank of Richmond
Trucking companies in the Fifth District reported that
demand remained robust in recent weeks. Volumes
were high across most goods, with contacts noting
particular strength in home goods. Truckers reported
turning away business amid high demand as a lack of
drivers restricted capacity. Contract and spot market
rates were high, giving many companies record margins
despite high operating costs. Contacts also noted that a
long backlog of parts for repairs is leaving trucks and
trailers out of use for extended periods of time.
high, driving rental rates higher. Both speculative and
built-to-suit industrial construction were strong, but developers struggled to find space. Multifamily occupancy
and rents rose. Contacts reported new multifamily construction was filling quickly and was increasingly including office space for one- and two- bedroom apartments.
Retail rental rates were strong, with especially high
occupancy for restaurants as new restaurants replaced
ones that had closed during the pandemic. Office vacancies remained high and were little changed despite landlords offering increased incentives and concessions.
Retail, Travel, and Tourism
Banking and Finance
Fifth District retailers reported moderate sales growth in
recent weeks. Demand for cars continued to exceed
supply while inventories were low, leading to lower
carrying costs and increased margins for auto dealers.
Clothing sales rose, and demand for furniture and home
goods remained strong. Retailers noted shortages of
and increased lead times for merchandise, particularly
on foreign-made goods. One contact reported refunding
several bridal parties because dresses did not arrive on
time for weddings. Many retailers were able to maintain
margins despite increases in costs of products and
shipping.
Overall, loan growth was moderate this period reflecting
solid underlying economic conditions but was tempered
by uncertainty related to COVID variants. Financial institutions indicated modest demand for conventional commercial lending, but a slowdown in mortgage lending
activity due to a cooling of the housing market with some
lenders also noting fewer refinancing requests. Competition remains strong for A-rated commercial loans, particularly around lower fixed rates and longer maturity terms.
Deposit growth was modest despite the low interest
rates paid on accounts. Credit quality continued to be
excellent and delinquencies remained at historically low
levels.
Travel and tourism remained strong and were little
changed in the Fifth District since our last report. Hotels
and short-term rentals had solid bookings, and daily
rates remained strong. Leisure travel remained strong
through the summer, and outdoor attractions continued
to see high visitations. However, some contacts expressed concerns as they saw delays in bookings for
conferences, businesses travel, and group travel, resulting from uncertainty surrounding COVID variants. Hotels
continued to limit services because of lack of staffing,
and some restaurants temporarily shut down because
they were unable to find workers.
Nonfinancial Services
Nonfinancial service firms saw little change in revenues
in recent weeks despite continued strong demand. Several firms noted that revenue growth was being suppressed by supply side factors, such as low inventories
and labor shortages and turnover. Several business
across a variety of professional and legal services said
that they recently lost employees to competitors, which
impacted their ability to meet demand. ■
Real Estate and Construction
Fifth District home sales remained strong but decreased
modestly since our last report. Sale prices continued to
rise, but growth of prices slowed. Days on the market
remained low but increased in some areas. Buyer traffic
softened slightly, which contacts reported could be
partly seasonal. Listings of resale homes rose, boosting
inventories. However, builders remained sold out of lots.
New construction was strong, but builders faced delays
and rapidly rising costs resulting from supply chain
disruptions in materials and appliances. Realtors reported an increasing number of investors in the market for
homes to remodel and resell.
Commercial real estate leasing grew moderately in
recent weeks. Demand for industrial space remained
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ August 2021
Summary of Economic Activity
Economic activity in the Sixth District expanded moderately from July through mid-August. Demand for labor intensified,
and worker availability remained extremely tight. Reports of increasing wage pressures continued and were more wide
spread. Some nonlabor costs continued to rise, and pricing power strengthened. Retail sales activity improved, but new
car sales declined due to supply chain constraints. Leisure travel activity remained robust. Demand for housing was
solid, inventories remained low, and home prices rose. On balance, commercial real estate activity was steady. Manufacturing activity increased and supply delivery times grew. Conditions at financial institutions were stable, on net, but
deposit growth slowed, and loan demand declined.
Prices
Employment and Wages
District contacts continued to cite increasing nonlabor
costs, especially for steel and freight, with multiple contacts referencing record increases in shipping container
rates. The price of lumber stabilized but remained elevated relative to pre-pandemic levels, while mentions of
increased food product costs became more widespread.
Contacts cited the ability to pass through price increases
with greater frequency, and with minimal resistance.
With the exception of labor costs, most contacts still
expect cost pressures to ease by 2022. The Atlanta
Fed’s Business Inflation Expectations survey showed
year-over-year unit costs increased significantly
to 3.3 percent on average in August, up from 2.9 percent
in July. Year-ahead expectations increased to 3 percent
in August, up from 2.8 percent in July.
Overall, employment in the District strengthened since
the previous report. Contacts indicated that labor supply
remained extremely tight. Many noted that the expiration
of unemployment benefits and the start of the school
year in many parts of the District had not increased the
supply of applicants as hoped. The recent uptick in
COVID-19 cases further constrained worker availability
as absenteeism increased due to illness or quarantine.
Workers were also less willing to work overtime hours.
Several employers noted that applicants did not have the
skills they were looking for. Labor shortages continued to
hold back activity for many firms–production had been
curtailed, projects placed on hold, store hours reduced,
and menus at restaurants had been slimmed down.
Some childcare centers facing workforce shortages have
chosen to close infant rooms because they require a
greater number of caregivers. Retention continued to be
a growing problem for firms. Restauranteurs noted concerns over “ghosting coasting,” where a new hire works
for a few days and moves on to the next restaurant
without notice before they are let go due to lack of skills.
Another growing concern for many employers was described as a “gray wave” of early retirements, particularly
among nurses. Employers continued to expand efforts to
attract and retain employees.
Consumer Spending and Tourism
Retail contacts reported strong sales and per capita
spending, particularly in leisure travel destinations in the
District. Due to persistent labor shortages, restaurants
and retailers remained challenged with meeting demand.
The pace of new vehicle sales slowed further due to
supply chain constraints, and the forecast for 2021 annual sales was revised downward.
Leisure travel activity was solid, on balance, with some
hospitality contacts reporting occupancies near 2019
levels. Recent COVID-19 surges are expected to curb
activity for the balance of August and increase uncertainty for the Fall season.
Wage pressures intensified over the reporting period and
upward pressure on wages was relatively widespread.
Wage pressure was most notable among entry-level
positions. Additionally, mentions of sign-on bonuses was
more prevalent. Several firms were actively re-evaluating
salary ranges or adjusting wages in reaction to competitor pay increases to retain their workforce.
Construction and Real Estate
Demand for housing remained strong. However, real
estate contacts noted that buyers have become more
reluctant to buy as home prices continued to reach peak
F-1
Federal Reserve Bank of Atlanta
originations ended and balance runoffs increased due to
streamlining of the forgiveness process. Demand for
consumer loans also declined. Residential real estate
balances increased slightly amid increased competition
for loans. Additions to allowances for loan losses slowed
as delinquency rates held steady.
levels and housing affordability declined in most markets
throughout the District. Inventory shortages continued to
create upward price pressure, especially in Florida,
where prices rose by over 20 percent in some markets..
After limiting sales earlier this year, some builders, as a
way to stay ahead of rising costs, have shifted to building
more speculative inventory rather than preselling. Although lumber costs have declined, labor and other material costs continued to rise.
Energy
Activity in the energy sector remained solid over the
reporting period, however, contacts expressed uncertainty about the impacts of COVID-19 on global demand for
oil and gas products, and consequently, refinery utilization. District contacts reported sustained improvement in
oil and gas production and continued efforts to incorporate efficiencies into drilling activity. Utilities industry
contacts noted stronger than expected residential sales,
which were offset by weaker than expected commercial
and industrial sales. They also continued to report power
generation upgrades and significant investment in renewable energy development and production.
Commercial real estate (CRE) activity was steady over
the reporting period. Conditions in the retail and hotel
sectors improved modestly. Multifamily activity strengthened, though contacts expressed growing uncertainty
over the future impacts of the lifting of the eviction moratorium on the sector. The office sector remained challenged as low demand and new deliveries pushed office
vacancies further upward. Contacts reported that competition among lenders for a small segment of CRE loans
accelerated. Smaller banks and non-bank lenders were
noted as the more aggressive CRE lenders.
Agriculture
Manufacturing
Agricultural conditions remained mixed. Widespread rain
relieved the District of drought conditions. With planting
completed, the District’s corn, cotton, soybean, peanut,
and rice crop conditions were mostly on par with this
time last year. District crop production forecasts were up
on a year-over-year basis for cotton, soybeans, corn,
and peanuts but down for rice. On a month-over-month
basis, the production forecast for Florida's orange crop
was up in July while the grapefruit production forecast
was unchanged; both forecasts remained below last
year's production levels. On a year-over-year basis, the
USDA reported cropland values were up across the
District states. The USDA reported year-over-year prices
paid to farmers in June were up for corn, cotton, soybeans, cattle, broilers, eggs, and milk, but down for rice.
On a month-over-month basis, prices were up for corn,
cotton, rice, cattle, and broilers but down for soybeans,
eggs, and milk. ■
Manufacturing contacts indicated that demand improved
since the previous report. Supply delivery times lengthened as supply chain disruptions continued, which coupled with worker shortages, continued to imped production for many manufacturers. Expectations for future
production levels remains optimistic.
Transportation
District transportation activity remained strong over the
reporting period, and contacts noted that demand for
transportation services continued to exceed supply amid
prolonged labor shortages and constrained container,
trailer, and truck capacity. Port contacts reported record
container volumes of imported goods. Trucking companies saw robust freight shipments. Railroads experienced significant increases in intermodal traffic; however, dwell times in rail yards increased. Air cargo contacts
noted steady demand, though there was growing uncertainty surrounding the impact of COVID-19 outbreaks on
activity. Transportation contacts anticipate further
strengthening in activity but no relief from supply chain
disruptions over the next 3-6 months.
Banking and Finance
Conditions at District financial institutions were stable.
Net interest margins remained compressed, though
earnings improved due to noninterest income generated
through asset sales and increased transactions. Deposit
levels remained elevated, but deposit growth slowed. On
balance, lending activity decelerated. Commercial and
industrial loan balances on institutions’ balance sheets
declined as new Paycheck Protection Program (PPP)
F-2
For more information about District economic conditions visit:
www.frbatlanta.org/economy‐matters/regional‐economics
Federal Reserve Bank of
Chicago
The Beige Book ■ August 2021
Summary of Economic Activity
Economic activity in the Seventh District increased moderately in July and early August and contacts expected growth to
continue at that pace in the coming months. Labor and materials supply constraints as well as rising COVID-19 cases
weighed on the expansion. Employment increased strongly, manufacturing grew moderately, business spending was up
modestly, construction and real estate rose slightly, and consumer spending decreased slightly. Wages and prices
increased strongly while financial conditions slightly improved. There was some retreat in prospects for agricultural
income.
Employment and Wages
Prices
Employment increased strongly over the reporting period, and contacts expected a similar pace of growth over
the next 12 months. Contacts across sectors reported
increased difficulty in finding workers at all skill levels
despite ramping up recruiting efforts. Some businesses,
particularly in the restaurant and manufacturing sectors,
were limiting operating hours because of a lack of workers. A contact at a workforce development agency noted
that, with the ease of finding new positions, workers
were being more discriminating about workplace environment, scheduling flexibility, and pay when choosing a
new job. Contacts pointed to childcare challenges, retirements, and financial support from the government as
important factors limiting labor supply. A number of
contacts indicated that they were delaying the return to
in-person work because of rising COVID-19 cases.
Overall, wage and benefit costs increased strongly. A
scarcity of applicants for open positions had forced a
number of contacts to raise wage offers. And some
noted that applicants were asking for higher wages than
they could afford to pay. In addition, many contacts who
usually raise pay annually had given mid-year raises to
their existing workforce.
Overall, prices rose strongly in July and early August,
though contacts expected a moderate increase in prices
over the next 12 months. There were large increases in
producer prices, driven by passthrough of higher materials, energy, labor, and transportation costs. Contacts
highlighted significantly higher freight costs as well as
price increases for a wide range of materials including
metals, metal products, petroleum-based products,
chemicals, electronics, and paper. At the consumer
level, prices moved up robustly overall. Contacts pointed
to solid demand, limited inventories, and increased costs
as sources of consumer price increases.
Consumer Spending
Consumer spending decreased slightly over the reporting period but remained at a high level. Spending on
leisure and hospitality slowed, with contacts attributing
the decline to the spread of the Delta variant. Nonauto
retail sales increased slightly. Sales at home improvement, furniture, appliance, electronics, and grocery
stores remained at solid levels. Contacts indicated that
back to school shopping started strong. A service that
analyzes consumer foot traffic in brick-and-mortar stores
indicated that activity in the Midwest had recovered to
pre-pandemic levels. Light vehicle sales decreased
again as new vehicle inventory became even more
G-1
Federal Reserve Bank of Chicago
scarce. Dealer profit margins fell from their recent highs
but remained at strong levels. Dealers continued to sell
vehicles from their future allotments by automakers.
limiting further growth. Auto output decreased as shortages of microchips and other materials hampered production. Demand for heavy machinery grew robustly, led
by higher sales in construction and agriculture. Demand
for heavy trucks was also strong. Contacts reported
higher steel demand from most industries. Steel service
center inventories were low, but not as tight as early in
the year. Specialty metals and chemical manufacturers
reported a moderate increase in sales. Although orders
were up for some kinds of building materials, shipments
of others moderated as home builders were squeezed by
labor and materials costs.
Business Spending
Business spending increased modestly in July and early
August. Retail inventories remained lean in many sectors, and contacts expected inventories to stay lean
through the holiday season and into early 2022. New
and used light vehicle inventories were very low as auto
production continued to lag. In manufacturing, for-sale
inventories were moderately low and there were shortages of a wide range of inputs including aluminum, steel,
copper, plastics, paints, pallets, paper, glue, and microchips. Some contacts said they were stocking up on
inputs in the hopes of avoiding future shutdowns, and
several had expanded their vendor portfolio to reduce
the risk of supply chain problems. Demand for transportation services outpaced supply, with many contacts
reporting delays and sharp increases in rates. Capital
expenditures rose some, and contacts expected a similar
pace of expansion over the next twelve months. Many
contacts noted that lead times for capital equipment
were much longer than usual. One contact again said
higher inventory expenses were crowding out their capital purchases. Energy demand from commercial customers increased modestly, but demand from industrial
customers declined slightly.
Banking and Finance
Financial conditions improved slightly over the reporting
period. Participants in equity and bond markets said
there was little change in conditions. Business loan
demand increased slightly. Banking contacts noted that
loan growth was a challenge as many potential borrowers had sufficient cash and others had nonbank sources
of funds. Business loan quality increased some, with
improvements reported across all sectors. Business loan
standards loosened slightly on balance. There were
reports of a pickup in M&A activity. In consumer markets,
loan demand increased slightly, led by growth in vehicle
and credit card volumes. Consumer loan quality improved, with one contact noting that quality was at an alltime high. High prices for vehicle repossessions helped
reduce loan losses. Loan standards were unchanged on
balance.
Construction and Real Estate
Construction and real estate activity moved up slightly
from the prior reporting period. Residential construction
was unchanged. Contacts said that higher costs for labor
and materials were pushing up prices beyond what some
buyers were willing to pay and forcing builders to pause
projects. Residential real estate activity was also little
changed as low inventories put a ceiling on sales volume. Prices continued to rise. Nonresidential construction activity was unchanged as well, as many existing
projects remained hampered by long lead times for
materials. Commercial real estate activity ticked up, with
both sales and prices slightly higher in recent weeks.
Demand for industrial and multi-family properties remained strong. In addition, demand for retail space in
high-traffic corridors increased noticeably, as retailers
that were able to survive the pandemic expanded their
operations.
Agriculture
Although most agriculture prices were higher than a year
ago, farm incomes were expected to be down in 2021
with the end of pandemic-related government support
payments. Cattle and egg prices increased during the
reporting period. Milk producers faced lower margins as
transportation costs rose and output prices mostly
moved sideways. Contacts hoped reopening schools
would boost bottled milk demand. Hog, corn, and soybean prices retreated from their recent highs. Relatively
tight supplies of crops helped support corn and soybean
prices. District corn and soybean harvests were expected to be near record levels, though parts of the
region still faced a drought. Concerns grew that strained
logistics would lead to shortages of parts for farm equipment during harvest and clog the movement of crops to
markets. Farmland values kept climbing. ■
Manufacturing
Manufacturing production increased moderately in July
and early August. Most manufacturing contacts reported
that business was above pre-pandemic levels, and many
were running at full capacity. Labor and supply chain
challenges were widely reported as the primary factors
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ August 2021
Summary of Economic Activity
Economic conditions have continued to improve at a moderate pace since our previous report. Contacts reported that
ongoing labor and raw material shortages are holding back growth. Customer spending has been unchanged since the
previous report. The rise in COVID-19 Delta variant cases was cited as a reason for increasing consumer wariness.
Cost pressures remain high, with around half of firms reporting increased prices and additional increases anticipated.
The residential real estate sector saw volumes slow slightly, but home and rental prices remained high. Despite high
demand, new construction projects continued to be hampered by supply disruptions. Banks reported a slight decline in
overall loan demand. Contacts remained optimistic, although less so than the last time they were surveyed in mid-May.
On net, 11 percent of contacts expect economic conditions during the remainder of 2021 to be better or somewhat
better than the same period one year ago.
over-year increases specifically in the transportation and
construction industries. Several construction contacts
reported pausing some projects until the rapid increases
in materials costs decline or stabilize. A contact reported
that the price for concrete has increased about 20% over
the past few months and the price for electric wire has
rapidly increased. Contacts reported that lumber prices
have recently declined. A contact in the auto repair industry reported price increases in the range of 30-60%
for certain auto parts. A contact that sells electrical signs
and billboards reported that prices for input materials
such as polycarbonate, aluminum, steel, wood, and
electrical parts are “skyrocketing.” A regional brewery
reported that their supplier increased prices twice between order and delivery for a pallet of aluminum.
Employment and Wages
Employment has increased slightly since our previous
report, though smaller firms reported more mixed trends.
Worker scarcity was frequently cited as the limiting factor
in firm growth; contacts reported a net decline in applicants per job since May. Firms struggled to hire and
retain workers; contacts reported offering on-the-job
training, sign-on and retention bonuses, and other benefits. Firms again presented mixed evidence that some
states’ discontinuation of federal UI enhancements affected their pool of applicants.
Wages have grown strongly, though small firm wages
continued to rise more slowly. On net, 60% of contacts
reported raising wages—well above historical values.
One manufacturer reported attracting few workers despite increasing starting wages above $17 per hour.
Consumer Spending
General retailers, auto dealers, and hospitality contacts
reported mixed business activity since our previous
report. July real sales tax collections decreased slightly
in Arkansas, Kentucky, and West Tennessee and increased in Missouri relative to June. General retailers
reported mixed sales over the past six weeks. Auto
dealers reported mixed sales, with continued high demand but low inventories and limited availability of lowcost units. Restaurants reported severe supply and
staffing shortages. A St. Louis hotel contact reported that
Prices
Prices have increased moderately since our previous
report. About half of contacts have increased prices to
consumers this quarter. Half of contacts plan to increase
prices to consumers in the near future. A regional boat
dealer reported new boat prices have increased 10% on
average since last year and will likely increase another
10% over the next year. Over two-thirds of contacts
reported increased input costs, including robust year-
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Federal Reserve Bank of St. Louis
business is slightly down relative to early July. In August,
an outdoor concert venue in Arkansas held its first significant event since 2019. The venue was pleased with
ticket sales but surprised only half of tickets were
punched for entry, which they attributed to the rise in
coronavirus cases.
since our previous report. Demand for and speculative
building of industrial properties continued to increase,
while the office and retail markets remain mixed. Industrial property inventories remained high in Memphis and
Little Rock. While demand for new industrial properties
remains elevated, supply chain issues, increased prices
for building materials, and labor shortages are preventing projects from continuing. One contact reported that
steel joists ordered now will not arrive until roughly the
middle of the second quarter of 2022. Some contacts
report that previously planned projects are being put on
hold or cancelled due to these problems.
Manufacturing
Manufacturing activity has strongly increased since our
previous report. Survey-based indices suggest production, capacity utilization, and new orders have strongly
increased. Production continues to be below operating
capacity due to labor shortages, and retailer order windows have lengthened as a result. Worker scarcity has
also led to issues in quality control, with surges in retail
returns and auto repairs due to product defects. Firms
have increased their focus on technological innovation to
increase labor productivity and product quality. On average, firms reported they expect strong increases in production, capacity utilization, and new orders in the coming quarter.
Banking and Finance
Banking conditions have been unchanged since our
previous report. Banking contacts reported a slight decrease in overall loan demand since the past survey
period. Auto loan demand declined modestly and demand for credit cards fell moderately. But contacts noted
a continued modest growth in real estate lending. Creditworthiness improved slightly in mortgage and commercial and industrial lending. Delinquency rates also declined modestly across all major loan types and credit
standards remained largely unchanged. District banks
reported that about three-quarters of PPP loans have
been forgiven. Outlooks were positive, although the
spread of the Delta variant has increased uncertainty.
Nonfinancial Services
Activity in the nonfinancial services sector has been
mixed since our previous report. Airport passenger traffic
has increased slightly since our previous report. Several
large health care providers have increased their minimum pay rates for workers. Nursing shortages have
been an issue as COVID cases rise. A hospital contact
reported increased cancelations of elective procedures.
Several contacts reported increased transportation
costs; a distribution contact noted that it has been difficult to find trucks and hire new drivers. A health and
wellness contact noted that COVID concerns continue to
hurt business. A large public university in Arkansas
reported record enrollment this fall due to a large freshman class and increased graduate student enrollment.
Agriculture and Natural Resources
Agriculture conditions have remained unchanged from
our previous report. Relative to early July, the percentage of corn and soybeans rated fair or better has decreased slightly while the percentage of rice increased
slightly and cotton experienced no change. Contacts
indicated that both nonlabor and labor costs have increased but income is up as well. One contact noted the
drought in South America has raised grain prices. They
also noted COVID-related shortages of maintenance
parts.
Real Estate and Construction
Residential real estate activity has decreased slightly
since our previous report, with some contacts reporting
the residential market is cooling off. Total home sales
have dipped slightly, and available inventory has increased. Home prices and median days on the market
remain stable. Most contacts expect the market to improve slightly or remain roughly the same in the next
quarter. Demand for multifamily homes increased and is
expected to continue. Rental prices continue to increase
across the District. The overall average rent in Memphis
is up 17% since last year. A contact in St. Louis observed that the eviction moratorium has prevented landlords from removing problem tenants with past due rent.
Natural resource extraction conditions fell slightly from
June to July, with seasonally adjusted coal production
decreasing just under 2%. But production is up 14%
from a year ago. ■
Commercial real estate activity has remained mixed
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ August 2021
Summary of Economic Activity
Ninth District economic activity grew at a moderate pace since mid-July. Employment saw strong growth, though hiring
demand continued to outpace labor’s response. Wage and price pressures were strong, with wholesale price pressures
remaining higher than those for consumer prices. Growth was noted in consumer spending, construction, manufacturing, agriculture, and energy. Real estate activity slowed slightly. Minority- and women-owned businesses in the District
reported moderate improvements in business activity.
Employment and Wages
Worker Experience
Employment saw strong growth since the last report.
Large firms reported strong net staffing growth, while
growth at smaller firms was softer overall. Larger firms
also reported comparatively higher wage increases,
which was likely helping their recruitment. Firms of all
sizes were upbeat regarding future hiring. A mid-August
survey of construction firms across the District found that
70 percent have been hiring in some capacity of late.
One Minneapolis-St. Paul firm said it needed workers
“now, and a year from now, and two years from now
based on what we have lined up.” Another survey found
that three-quarters of hospitality and tourism firms in
Minnesota were hiring to either expand staffing or
replace turnover. Firms in every sector reported
continued difficulty attracting labor.
Labor supply remained tight across the District. Initial
unemployment claims continued to decline through midAugust and claims in traditional unemployment
insurance programs fell as of early August relative to
earlier in the summer, particularly in the Dakotas and
Montana. Claims in pandemic-era unemployment
programs in Minnesota and Wisconsin only were
modestly lower at the end of July compared with earlier
in the summer. A workforce development contact in
northern Minnesota pointed out that labor scarcity was
causing some currently employed workers to be
overworked and tired. Two recent surveys revealed that
people want higher wages, flexibility, and better benefits
in current or future positions as they continued to
confront other life challenges. Low-wage workers in
Minneapolis-St. Paul expressed concerns with being
able to pay for housing, utilities, and food. Workforce
development professionals in Montana also highlighted
housing and childcare affordability as major challenges
faced by job seekers. COVID-19 exposure remained a
big concern among workers and job seekers.
Wage pressures were strong. District-wide, about onethird of all firms, and almost half of large firms, said
wages had risen by 3 percent or more over the last year.
Surveys of construction and hospitality firms also
showed strong wage growth. A Minnesota hotelier said
housekeeping wages were increased from $13 to $15 an
hour. “It didn't attract labor, but it made our current [staff]
very happy and felt great to be able to afford this
increase.” Two of Minnesota’s largest public employee
unions settled new contracts with 2.5 percent wage
increases.
Prices
Price pressures remained elevated since the previous
report. One-third of respondents to a general business
survey reported that non-labor input costs were up by
more than 10 percent relative to pre-pandemic levels;
one-quarter said that they had increased prices charged
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Federal Reserve Bank of Minneapolis
to customers for their products or services by more than
10 percent over the same period. Hospitality firms
reported steep input price pressures, but flat final prices
on balance. While some lumber and wood prices
retreated from recent highs, a construction survey found
steep increases for most building materials. Retail fuel
prices were little changed in most District states except
Montana, where they rose moderately.
Commercial real estate was flat overall. Industrial
property continued to be strong. Retail and office sectors
were poised to improve before the recent increase in
Delta variant infections, which has affected return-tooffice plans for many downtown employers and was
likely to influence future leasing and new-construction
demand. Residential real estate slowed. Closed sales in
July were lower in many larger District markets
compared with a year earlier, thanks to very low
inventories of homes for sale and steeply rising prices.
Consumer Spending
Consumer spending was moderately higher since the
last report, sustaining a high overall level. Summer
tourism has been strong, with contacts reporting record
activity in western District states. Hospitality and tourism
firms in northern and central Minnesota reported strong
overall activity, with many exceeding 2019 levels; those
in Minneapolis-St. Paul saw recent gains but remained
far below normal seasonal levels. Passenger traffic at
District airports continued to improve, reaching 80
percent of normal seasonal levels in August. In
Minnesota, vehicle sales in July and August were mostly
flat. A Montana vehicle dealer said August sales were
slower due to very low inventory, and reduced trade-in
volume also negatively affected used-car sales. “We
can’t build up any ground stock, but demand is solid.
Manufacturing
District manufacturing activity increased moderately
since the previous report. A regional manufacturing
index indicated increased activity in Minnesota, North
Dakota, and South Dakota in July relative to the previous
month. Manufacturing respondents to recent surveys
reported solidly increased revenues over the previous
three months and a positive outlook for the coming
quarter. Industry contacts described continued strong
demand, with most concerns related to input costs,
supply-chain disruptions, and difficulty finding workers.
Agriculture, Energy, and Natural Resources
Activity in the services sector increased moderately
since the previous report. Contacts in accounting
remained busy. A majority of professional services
respondents to a recent survey reported steady to
increased revenues in the most recent quarter.
Conditions were more mixed among transportation and
warehousing firms, as they continued to deal with supply
-chain disruptions.
While extreme drought conditions were taking a toll in
many areas, District agricultural producers continued to
benefit from strong commodity prices. Agricultural
bankers indicated broadly increased farm income and
spending in the second quarter, with a positive but more
moderate outlook for the third quarter. However,
livestock and dairy producers were suffering from the
drought’s impact on hay availability and pasture
conditions, while corn and soybean crop conditions were
deteriorating. District oil and gas exploration activity
increased modestly since the previous report.
Construction and Real Estate
Minority- and Women-Owned Business Enterprises
Services
Commercial construction grew moderately since the last
report. Firms across the District reported that recent
activity and sales were higher both year-over-year and
quarter-over-quarter. However, firms doing infrastructure
work reported slower activity. There were fewer reports
of project cancellations, but project delays increased.
Firms also reported a slowing of new projects out for bid,
particularly for public projects. Labor availability, supply
chain constraints, and high costs for materials were
widely cited for project delays, the slowing of new
projects out for bid, and lower firm profits. Residential
construction grew moderately overall, but firms also
reported more cancellations due to rising costs, as well
as significant increases in project delays. However, the
outlook for future projects remained positive.
Minority and women-owned business enterprises
(MWBEs) in the region reported moderate growth in
business activity. Labor supply continued to challenge
businesses’ ability to sustain operations, and many
continued to report having raised wages to retain
workers and/or attract applicants. Entrepreneurs also
reported that increased nonlabor input prices and supply
chain disruptions were major challenges for their
business. A considerable number of MWBE survey
respondents reported having passed on increased costs
to customers by raising their own prices. A non-profit
contact in Minnesota reported an increase in the number
of aspiring entrepreneurs. Access to funding and
information remained a challenge for some startups. ■
For more information on the Ninth District economy,
visit: minneapolisfed.org/region-and-community
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Summary of Economic Activity
Employment and Wages
Prices
Consumer Spending
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Manufacturing and Other Business Activity
Banking
Energy
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Agriculture
Real Estate and Construction
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Federal Reserve Bank of
Dallas
The Beige Book ■ August 2021
Summary of Economic Activity
Solid expansion continued in the Eleventh District economy, though surging COVID-19 cases has added uncertainty to
outlooks. Growth in the manufacturing and nonfinancial services sectors remained strong, and retail sales rose in August after holding steady in recent months. Home sales remained solid but eased. Overall loan volumes rose broadly,
led by commercial real estate lending. Energy activity rose steadily, and agricultural conditions were very strong. Employment growth was robust, and wage growth remained elevated amid widespread labor shortages. Ongoing supply
chain disruptions continued to drive up prices, though pressures eased slightly over the reporting period. Outlooks improved, though uncertainty increased.
Employment and Wages
Prices
Employment expanded robustly overall, with a marked
pickup in service sector job growth. Retail employment
was mostly flat. Difficulty hiring remained widespread
across skill levels and was quite severe for many contacts, particularly small businesses. A Dallas Fed survey
of more than 350 Texas businesses showed that about
70 percent were trying to hire in August, and the vast
majority named a lack of applicants as an impediment.
Staffing shortages were particularly acute in health care
and especially among nurses, exacerbated by the recent
surge in COVID-19 cases. Hospitals also reported a lack
of a large-scale return of applicants for low-wage positions, despite the end of federal unemployment benefits.
Prices continued to rise, albeit at a slightly slower pace
in July and August than in June. Rising input prices
continued to outpace selling price growth, compressing
margins. Input costs rose particularly fast in the manufacturing sector, where supply chain disruptions were
widespread. Contacts noted unprecedented increases in
steel and aluminum prices, and others noted that material cost increases were happening more frequently than
before. Construction materials were also seeing sizeable
price increases, though builders noted some reprieve in
lumber costs. Looking ahead, expectations for future
cost increases abated slightly in the service sector but
picked up among manufacturers.
Wage growth remained elevated, and numerous contacts noted significant wage pressure to attract and
retain employees. Among firms trying to hire, about half
said a key impediment was applicants looking for higher
pay than what was being offered. Energy industry contacts reported substantial pressure on wages and benefits, with some firms increasing wages as much as 15 to
20 percent to keep workers from defecting to competitors
or adjacent industries.
Manufacturing
Texas factory activity continued to expand at an aboveaverage pace in July and August. Growth was led by
nondurables manufacturing, particularly food. Refiners
saw increased demand as motor fuel consumption rose
seasonally but noted that margins were still muted. Petrochemical firms reported strong demand, with one
noting record earnings. Many contacts noted persistent
materials shortages and extended lead times. Nearly
three-fourths of manufacturers said supply chain disruptions were restraining their revenues, according to a
Dallas Fed survey of 90 manufacturing executives. Labor
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Federal Reserve Bank of Dallas
availability issues also hampered firms’ ability to meet
orders. Overall, outlooks among manufacturers remained optimistic, though the Delta variant and surging
COVID-19 cases were driving up uncertainty.
market was still booming. Demand for office space continued to languish due to the fallout from work-fromhome policies, and contacts do not expect much improvement in the near term.
Retail Sales
Financial Services
Retail sales were fairly flat in July but rose in August,
despite widespread supply chain issues and tight inventories, particularly among auto dealers. A Dallas Fed
survey of 42 Texas retailers showed that nearly threefourths of respondents cited supply chain disruptions as
a primary factor restraining revenues. Outlooks were
mildly positive, though uncertainty continued to increase.
Loan demand continued to increase at a robust pace,
pushing up overall loan volumes. Commercial real estate
lending continued to lead growth, while growth in commercial and industrial lending abated over the last six
weeks. Nonperforming loans continued to decrease and
credit standards remained largely unchanged. Loan
pricing remained competitive, with multiple respondents
citing concerns regarding too much liquidity and margin
compression. Outlooks remained optimistic, though less
so than the previous reporting period. Multiple bankers
expressed concern that the Delta variant could slow
spending and growth.
Nonfinancial Services
Broad-based, solid expansion continued in nonfinancial
services. Growth was led by transportation services.
Airlines said air travel continued to surge in July and in
early August, boosted by pent-up demand for leisure
travel, but has eased more recently, driven by rapidly
rising Delta-variant infections, seasonality, and a delay in
the return of business travel. Cargo tonnage through
Texas seaports set new records in July, as businesses
worked to build up inventory amid elevated levels of
consumer demand and persistent supply chain disruptions. Staffing firms report slightly slower growth, with
some contacts pointing to uncertainty caused by the
Delta variant as a contributing factor to the deceleration.
Leisure and hospitality firms noted revenues rose in July
but were fairly flat in August, and restaurants said worker
shortages were constraining operations. Overall, outlooks were positive, though less optimistic in August than
in prior periods as the surging Delta variant, persistent
labor and supply shortages, and rising costs are expected to dampen the economic recovery. Previous
forecasts for a strong return of business travel and
events this fall have been adjusted downward by the
pandemic resurgence.
Energy
Drilling and completion activity rose steadily over the
past six weeks. Orders for new equipment were up.
Contacts generally felt that current oil and gas prices are
sufficient for producers to meet capital expenditures
goals and even slightly grow production. Optimism
among contacts was largely unchanged, and most contacts discounted the impact of the current surge in
COVID-19 on the demand outlook.
Agriculture
Texas was nearly drought free by the end of the reporting period, though drought conditions persisted in New
Mexico. Sufficient soil moisture boosted crop conditions
for wheat and row crops alike, allowing many producers
to reap strong yields. Preliminary reports point to higher
production this year versus last year for Texas’ major
crops—cotton, sorghum, corn and soybeans. Crop prices remained strong, supporting profitability. Rising production costs are a concern going forward, but outlooks
were generally optimistic. In the livestock sector, pasture
conditions were favorable, and prices rose for cattle and
poultry. ■
Construction and Real Estate
Activity in the single-family housing market moderated
during the reporting period. Sales were still generally
solid but not as frothy as they had been earlier in the
year, partly due to seasonality. Several builders were no
longer capping sales, and some cited reintroducing
incentives or slight discounting. Construction backlogs
remained large, and completion times were elongated
due to labor challenges and supply shortages for items
like windows, bricks, and appliances. Home prices have
begun to stabilize. Outlooks were generally positive.
Apartment leasing activity remained solid, strengthening
occupancy and rents. Buyer interest in multifamily properties was near record highs. Activity in the industrial
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ August 2021
Summary of Economic Activity
Economic activity in the Twelfth District increased at a moderate pace during the reporting period of July through midAugust. Employment levels continued to expand despite labor shortages, and upward wage pressures intensified in
almost all sectors. Prices rose substantially, driven by rising input costs and continued supply chain disruptions. Retail
sales increased modestly, while conditions in the services sectors deteriorated somewhat due to the spread of the Delta
variant. Manufacturing activity strengthened slightly, as did activity in the agriculture and resources sectors. Conditions
in the residential real estate market deteriorated somewhat, while activity in the commercial real estate sector picked up
slightly. Lending activity was largely unchanged.
Employment and Wages
such as gift cards. Several contacts in the health-care
and financial services sectors mentioned planning further
wage increases across the board in 2022.
Overall employment levels continued to increase at a
moderate pace. Employment gains were led by agriculture, leisure, hospitality, and government, as well as
education as schools reopened for the fall 2021 semester. However, almost all employers across the District
reported significant challenges in attracting and retaining
talent at all skill levels. In particular, contacts in the transportation, manufacturing, construction, hospitality, and
retail sectors mentioned having many unfilled positions.
Employment levels in energy and financial services were
more stable. Employee turnover was noted to have
increased, with one contact in the hospitality sector
observing that almost half of new employees quit after
only one or two months on the job. Several employers
across the District mentioned implementing vaccine
mandates for all new hires. Some contacts in the financial services sector highlighted increased reports of
skilled workers demanding more flexible work arrangements. A few contacts noted a rise in Delta variant outbreaks among employees, which led to an increase in
absenteeism, reinstatement of indoor face covering
requirements, and delays in return-to-office plans.
Prices
Prices rose substantially over the reporting period. Although lumber prices have dropped significantly, prices
for other building materials, such as metals, cement, and
wallboard have continued to climb. Other price increases
were noted for energy, information technology, textiles,
airline tickets, and agricultural products, such as fruits,
meats, and seafood. The reported biggest drivers of
these price hikes included higher shipping and logistical
costs, continued supply chain disruptions, and rising
labor costs. One contact in California noted that recent
import tax changes in Europe have also added to ecommerce costs domestically.
Retail Trade and Services
Retail sales increased modestly in the past several
weeks. Online spending, as well as shopping at big box
retailers and grocery stores, strengthened further, driven
by pent-up demand and excess savings. However, foot
traffic at large shopping centers retreated a bit due to the
spread of the Delta variant. In addition, reports across
the District mentioned widespread shortages of various
goods, such as paper products, food products, and
hardware equipment, which limited sales growth. These
shortages were caused by continued supply chain disruptions, especially at ports in China and Europe. Sales
at home improvement stores and specialty retailers
Wage pressures intensified further, especially for entrylevel service jobs. To combat low availability of labor and
high turnover rates, many employers significantly increased wages, including those in the leisure, hospitality,
manufacturing, technology, and health-care services. In
addition, employers reported offering sign-on and retention bonuses, overtime pay, and one-time cash benefits
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Federal Reserve Bank of San Francisco
decreased as more consumer spending shifted from
goods back to services.
Real Estate and Construction
Activity in the residential real estate market edged down
somewhat compared to the previous reporting period.
The spread of the Delta variant and rapid home price
increases have led some potential buyers to delay their
purchases. Despite the recent drop in lumber prices,
homebuilders across the District continued reporting
delays in construction due to shortages of labor and
other raw materials. Additionally, several contacts in the
Pacific Northwest noted a shortage of undeveloped land.
Growth in home prices was noted to have slowed down
a bit. Order backlogs remained high, as did new permit
issuances. Demand for multifamily homes increased
further, with one contact noting a surge in apartment
permitting heading into the fall. A housing developer in
Alaska observed that, although rental applications have
increased, there has also been an increase in less qualified applicants, with some of them moving to new housing to forestall the impact of the end of eviction moratoriums.
Conditions in the consumer and business services sectors deteriorated somewhat. The spread of the Delta
variant and reinstated social-distancing restrictions have
led to a slowdown in demand for travel, leisure, hospitality, and food services. Labor shortages have severely
reduced capacity at some hotels, airlines, and restaurants, with one hotel in the Mountain West having to
close off several floors due to a lack of housekeeping
staff. Demand for health-care services and medical
testing increased with the spread of the Delta variant.
The entertainment industry, which had been recovering
well during the summer, was also affected recently by
the spread of the variant, causing some production
shoots to shut down.
Manufacturing
Manufacturing activity continued to strengthen, albeit
slightly. New orders grew further for fabricated metals,
renewable energy equipment, and aerospace manufacturing. Capacity utilization rates at metal and steel manufacturers were noted to have exceeded pre-pandemic
levels. However, supply chain disruptions and raw material shortages continued to be a major problem, causing
lean inventories and delays in order fulfillment. These
obstacles were further exacerbated by outbreaks of the
Delta variant in Asia, which caused some auto manufacturers to curb production heading into the fall. A wood
product manufacturer in the Pacific Northwest noted that
after a year of strong growth, supply has now exceeded
demand, and sawmills in the District have curtailed hours
and shifts in the past several weeks.
Demand for commercial real estate picked up slightly on
balance. Sales of office and retail spaces were noted to
have increased in the Mountain West and California. On
the other hand, demand for new hospitality spaces decreased following the spread of the Delta variant. Demand for industrial, warehouse, manufacturing, and
other mixed-use spaces continued to be strong. Many
contacts across the District noted that they have postponed or reversed their return-to-work plans until 2022
due to the Delta variant, causing some to reconsider
their office space needs.
Financial Institutions
Lending activity was largely unchanged over the reporting period. Most new loan origination concentrated in
mortgage refinancing, construction activities, and commercial real estate purchases. Credit card activity among
consumers increased slightly, while demand for commercial and industrial loans was muted. Reports from across
the District mentioned increased competition for loans,
although credit quality and liquidity levels remained
healthy. A contact in Southern California observed that
while SPAC (special purpose acquisition companies)
activity decreased dramatically in recent months, investor interest in sustainability and clean energy technology
remained high. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource sectors improved modestly on net. Domestic and international
demand for meats, fruits, vegetables, nuts, and seafood
remained strong. Supply chain disruptions continued to
hinder trade with Asia, although shipping delays were
noted to have eased somewhat in the past several
weeks. At the same time, several growers in the Pacific
Northwest noted that extreme heat and drought conditions have caused considerable damage to this year’s
wheat and tree fruit yields, which is projected to reduce
available inventory even further. A contact in California
observed that recalls of poultry, fish, and other food
products caused temporary disruptions in final sales.
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Cite this document
Federal Reserve (2021, September 21). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20210922
@misc{wtfs_beige_book_20210922,
author = {Federal Reserve},
title = {Beige Book},
year = {2021},
month = {Sep},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20210922},
note = {Retrieved via When the Fed Speaks corpus}
}