Beige Book
For use at 2:00 PM EDT
Wednesday
October 20, 2021
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
October 2021
Federal Reserve Districts
Minneapolis
Boston
New York
Chicago
Cleveland
Philadelphia
San Francisco
Kansas City
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
St. Louis
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 Richmond based on information collected
on or before October 8, 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 ■ October 2021
Overall Economic Activity
Economic activity grew at a modest to moderate rate, according to the majority of Federal Reserve Districts. Several
Districts noted, however, that the pace of growth slowed this period, constrained by supply chain disruptions, labor
shortages, and uncertainty around the Delta variant of COVID-19. A majority of Districts indicated positive growth in
consumer spending; however, auto sales were widely reported as declining due to low inventory levels and rising prices. Travel and tourism activity varied by District with some seeing continued or strengthening leisure travel while others
saw declines that coincided with rises in COVID cases and the start of the school year. Manufacturing grew moderately
to robustly in most parts of the country, as did trucking and freight. Growth in nonmanufacturing activity ranged from
slight to moderate for most Districts. Loan demand was generally reported as flat to modest this period. Residential real
estate activity was unchanged or slowed slightly but the market remained healthy, overall. Reports on nonresidential
real estate varied across Districts and market segments. Agriculture conditions were mixed and energy markets were
little changed, on balance. Outlooks for near-term economic activity remained positive, overall, but some Districts noted
increased uncertainty and more cautious optimism than in previous months.
Employment and Wages
Employment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labor
growth was dampened by a low supply of workers. Transportation and technology firms saw particularly low labor
supply, while many retail, hospitality, and manufacturing firms cut hours or production because they did not have
enough workers. Firms reported high turnover, as workers left for other jobs or retired. Child-care issues and vaccine
mandates were widely cited as contributing to the problem, along with COVID-related absences. Many firms offered
increased training to expand the candidate pool. In some cases, firms increased automation to help offset labor shortages. The majority of Districts reported robust wage growth. Firms reported increasing starting wages to attract talent
and increasing wages for existing workers to retain them. Many also offered signing and retention bonuses, flexible
work schedules, or increased vacation time to incentivize workers to remain in their positions.
Prices
Most Districts reported significantly elevated prices, fueled by rising demand for goods and raw materials. Reports of
input cost increases were widespread across industry sectors, driven by product scarcity resulting from supply chain
bottlenecks. Price pressures also arose from increased transportation and labor constraints as well as commodity
shortages. Prices of steel, electronic components, and freight costs rose markedly this period. Many firms raised selling
prices indicating a greater ability to pass along cost increases to customers amid strong demand. Expectations for
future price growth varied with some expecting price to remain high or increase further while others expected prices to
moderate over the next 12 months.
Highlights by Federal Reserve District
New York
Boston
Growth in the regional economy slowed to a modest
pace in recent weeks, as supply disruptions and labor
shortages have impeded economic activity. Employment
and wages increased. Businesses reported ongoing
widespread escalation in both input costs and selling
prices. Despite the slowdown, contacts continued to
express optimism about future business prospects.
Business activity in the First District expanded at a modest to moderate pace in August and September 2021.
Wages increased moderately as firms competed for
scarce workers. Retailers and manufacturers posted
moderate to steep price increases amid ongoing supply
disruptions. The outlook was cautiously optimistic.
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National Summary
Philadelphia
St. Louis
Business activity grew modestly during the current Beige
Book period – slower than the prior period – but remained below pre-pandemic levels. Fear and uncertainty
of the Delta variant continued to constrain growth, but
contacts were most worried by ongoing labor shortages
and supply chain disruptions. Overall, employment continued to grow modestly, while wages and prices continued to rise at a moderate pace.
Economic conditions have continued to improve at a
moderate pace since our previous report. Labor shortages and supply chain issues continue to be cited as primary issues. Increased input costs have led to cost
pressures across industries, and firms with the power to
do so report passing on increased costs to consumers.
Minneapolis
District economic activity grew moderately since the
previous report. Employment increased, though hiring
demand continued to outstrip labor availability, and wage
pressures were strong. Price pressures remained elevated; certain input prices eased, but firms were passing
more of their input costs through to final prices. Manufacturing increased, with one contact noting that passing
along higher prices hadn’t hampered demand.
Cleveland
Economic activity remained strong in the District. While
demand was still solid, supply chain disruptions tempered the pace of sales and output growth. The expiration of supplemental unemployment insurance benefits
and a return to school did little to alleviate worker shortages, and wages continued to rise. This and higher
nonlabor input costs put further upward pressure on
selling prices.
Kansas City
Economic activity continued to grow at a moderate pace
and was broad-based. Ongoing growth in manufacturing
alongside renewed growth in the energy sector supported the regional economy. Consumer spending at restaurants and hotels was resilient through the recent surge in
COVID cases. However, business travel did not resume
as expected in September, with many large events being
postponed.
Richmond
The regional economy increased at a modest rate as
growth was constrained by labor shortages and shortages and delays receiving goods and raw materials
needed for business. Employers across sectors had
difficulties finding and keeping workers, which led to
offering higher wages and bonuses to recruit and retain
staff. Prices remained elevated compared to year-ago
levels.
Dallas
The District economy expanded at a solid rate, with
broad-based growth across sectors. COVID-19 and labor
and supply-chain constraints remained headwinds.
Employment growth was robust, and wage and price
growth remained highly elevated. Outlooks stayed positive, with most contacts expecting stronger business six
months from now, though uncertainty rose.
Atlanta
Economic activity expanded moderately. Labor markets
remained tight and wage pressures intensified. Some
nonlabor costs stayed elevated. Retail sales increased.
Leisure travel was strong, but hotel occupancy levels
declined. Residential real estate demand remained
robust. Commercial real estate conditions were stable.
Manufacturing activity expanded. Banking conditions
were steady.
San Francisco
Economic activity in the District strengthened moderately. Labor market tightened further as wages and price
levels climbed up. Retail sales expanded moderately
while activity in consumer services slowed down somewhat. Conditions in the agriculture and manufacturing
sectors strengthened slightly. Lending activity increased
further while residential construction expanded notably.
Chicago
Economic activity increased modestly. Employment,
manufacturing, and business spending grew moderately,
but consumer spending and construction and real estate
were little changed. Wages and prices increased strongly while financial conditions were flat. District corn and
soybean harvests were larger than expected and near
record levels.
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Federal Reserve Bank of
Boston
The Beige Book ■ October 2021
Summary of Economic Activity
Business activity in the First District expanded at a modest to moderate pace. Software and IT firms posted moderate
revenue gains on balance. Retail sales were stable or up modestly and easily exceeded pre-pandemic levels; demand
for new and used autos continued to outstrip limited supplies. Air travel and hotel occupancy improved but stayed well
below pre-pandemic levels. Manufacturers saw mixed recent results but most reported revenue gains on a year-overyear basis. Sales of single-family homes softened, but that may reflect the resumption of normal seasonal patterns
following an unusual 2020, as home prices continued to climb. Commercial real estate markets were stable but the
outlook for office leasing remained uncertain. Wages increased moderately amid widespread labor scarcity. Retailers
and manufacturers posted moderate to steep price increases amid ongoing supply disruptions. The outlook was cautiously optimistic.
offset to skyrocketing shipping costs and delays. New
and used car prices climbed further, as demand for
autos continued to outstrip inventories and the chip
shortage persisted. Hotel room rates increased moderately but remained 27 percent lower than in 2019. Manufacturers faced increased input prices—in the 10 to 30
percent range on a year-over-year basis–and two-thirds
of firms raised output prices in the third quarter by moderate to robust margins, while the remainder held prices
firm. Software contacts reported no changes in prices
other than increases that were built into existing contracts, but one company is considering making price
changes in 2022.
Employment and Wages
The labor market remained tight across sectors. At several businesses, competition for new hires was intense,
leading to robust increases in starting wages, new signing bonuses, and increased willingness to train, but one
firm was not planning to increase wages despite facing
hiring challenges. Wages were on the rise for existing
workers as well, as a few firms planned for larger merit
increases in 2022 and at least one offered retention
bonuses as well as non-wage perks such as flexible
work arrangements. In an exception, one manufacturer
found it easier to fill positions recently than in the first
half of the year. Manufacturing contacts reported higher
labor turnover that some attributed to the lagged effects
of the pandemic, and that others had seen in response
to vaccine mandates—although one firm said that its
vaccine mandate had not caused any quits. Most software contacts experienced normal turnover, however.
Headcounts were mixed but in most cases were either
flat or down, as turnover and hiring difficulties left firms
below desired staffing levels.
Retail and Tourism
First District retailers reported ongoing strength in sales
in the third quarter of 2021. A furniture seller enjoyed
record-setting revenue this past summer despite a modest decline in units sold from the second quarter, outcomes that reflected the roughly 30 percent increase in
the seller’s prices since February. A clothing retailer
recorded recent sales that exceeded its comparable prepandemic levels by low double-digit percentages, amid
strength in both online and in-store sales despite a recent decline in foot traffic at its shops. Sales of both new
and used automobiles held steady at a robust pace.
Prices
Prices were flat at software and IT firms but generally
increased among manufacturing and retail contacts, in
some cases by large margins. A furniture retailer enacted price increases of over 30 percent since February
2021, driven by increased shipping and materials costs.
An apparel contact increased its usage of air freight—
historically a very costly way to transport goods—as an
Travel industry respondents reported that airline passenger traffic through Boston picked up steadily in recent
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Federal Reserve Bank of Boston
months, and in August and September was off by “only”
about 35 percent compared with the same months in
2019. Scheduled passengers in October are expected to
narrow that gap further, although international and business travel continue to trail domestic leisure travel. Hotel
occupancy rates and room rates in the greater Boston
area also saw further modest improvements in recent
months. Occupancy rates in August averaged around 65
percent, the highest rate since the start of the pandemic,
despite still falling short of 2019 levels by about 20 percentage points.
recent weeks. The industrial and life sciences markets
continued to enjoy strong leasing demand, with rents
steady at high levels and very low vacancy rates. The life
sciences market in Boston has maintained near-zero
vacancies. Office leasing was flat at a sluggish pace,
with mostly short-term lease renewals, as the Delta
variant surge caused delays in return-to-office dates and
added to uncertainty. Contacts still expect office tenants
to reduce footprints permanently as they pursue hybrid
work moving forward, but the size of such reductions
remains unclear. Office rents were mostly flat and vacancy rates were flat or up slightly. Retail leasing activity
remained weak in Boston and Connecticut and comparatively strong in Maine and Rhode Island. Groceryanchored and experiential retail continued to outperform
other categories. The lending market for commercial real
estate stayed highly competitive, driven by banks and
institutional investors flush with capital. Investment demand was robust across multiple markets, excepting
office, but some contacts forecasted an uptick in office
sales in 2022. The outlook for leasing in the weaker
segments (big box retail and office) hinged on the resolution of uncertainty over the course of the virus in the
coming months.
Manufacturing and Related Services
Manufacturers reported mixed revenue performance.
Two saw modest declines in recent sales, two had stable
results, and two registered at least modest revenue
increases. Most contacts nonetheless said that sales
were higher than they were one year ago, and most had
sales above pre-pandemic levels. Most contacts continued to complain of supply-chain disruptions that either
dulled recent sales or threatened to crimp future business. These included three firms that faced production
delays and two that had trouble keeping inventories at
their desired levels (due to input shortages as well as
robust demand). Capital expenditures were stable at
high levels, with no major revisions to spending plans
moving forward. The outlook remained mostly positive,
but some faced ongoing risks related to supply-chain
issues.
Residential Real Estate
Low inventories and upward pricing pressure persisted in
the residential real estate markets of the First District in
August. Over-the-year changes to August 2021 were
reported for all but two New England states; data from
Connecticut and Vermont were not available.
Software and Information Technology Services
Three out of four software and IT contacts in the First
District reported higher sales in the third quarter, by
modest to very large margins. Two contacts said that
demand for their products enjoyed an ongoing boost
from firms’ increased reliance on virtual business formats
during the pandemic, shifts that were seen as largely
permanent, but one firm said that pandemic-related
supply issues presented an ongoing drag on their business. On a year-over-year basis revenues were up at
two firms and were stable or down modestly at two others. Labor shortages threatened to delay the fulfillment
of orders at one firm, and another reported increased
wage pressures for new hires. Capital spending was
mixed across firms—one was spending less after switching to less capital-intensive technologies, another was
ramping up investments to tap new markets, and others
had stable spending. Contacts were mostly optimistic
looking ahead, but two perceived that COVID-19 presented ongoing risks to economic activity.
As in the previous report, median sales prices increased,
and inventories fell year-over-year in all reporting areas.
Sales of single-family homes were down year-over-year,
indicating a slight deceleration in activity from July. While
condo sales once again increased year-over-year in
Rhode Island, Massachusetts, and Boston, condo sales
fell over-the-month in August in Massachusetts and
Boston and fell over-the-year in New Hampshire and
Maine. All contacts found the declines in sales noteworthy, and the slowdown was attributed to a combination of
buyers’ frustrations over high prices and low inventories
as well as to increased vacation-taking compared with
August 2020.■
Commercial Real Estate
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
Commercial real estate activity in the First District was
mixed across submarkets and mostly unchanged in
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Federal Reserve Bank of
New York
The Beige Book ■ October 2021
Summary of Economic Activity
Economic growth in the Second District slowed to a modest pace, as supply disruptions and labor shortages have impeded economic activity. Still, contacts remained largely optimistic about the near-term business outlook. The job market has remained exceptionally tight, as firms continued to add workers and raise wages. Businesses reported ongoing
widespread escalation in both input costs and selling prices. Consumer spending was flat to slightly lower, pulled down
by sharply weaker vehicle sales attributed to severe supply shortages. The home sales market was mixed but on balance a bit stronger, while rental markets have continued to rebound; there were scattered signs of improvement in office
markets. Both residential and commercial construction activity increased modestly, despite shortages of materials.
Finally, contacts in the broad finance sector reported flat activity, while regional banks reported steady loan demand and
unchanged delinquency rates.
industries. Rising prices were widely mentioned for steel,
aluminum, lumber, gasoline, and freight-related services.
Contacts in all sectors anticipate widespread input price
hikes in the months ahead.
Employment and Wages
The job market has remained exceptionally tight, with
businesses continuing to add workers—particularly in the
leisure & hospitality and transportation industries. Most
contacts noted severe labor shortages despite federal
supplementary jobless benefits expiring. Many businesses reported difficulty hiring and retaining workers, and
some contacts noted that more people are retiring early.
An upstate New York employment agency noted especially strong demand for tech workers and salespeople. A
New York City agency reported more moderate hiring but
expects a pickup as companies bring more people back
to the office. Many businesses said they plan to continue
hiring in the months ahead.
Selling prices continued to climb, with particularly widespread price hikes again reported by manufacturers and
wholesalers. Notably, more retailers than at any time in
recent years indicated that they have raised prices. A
sizable proportion of contacts in most sectors plan to
hike prices in the months ahead.
Consumer Spending
Consumer spending weakened in the latest reporting
period. Non-auto retailers reported steady to lower activity in recent weeks and have grown somewhat less optimistic about the upcoming holiday season. One retail
chain indicated that sales at New York City stores continued to lag well below pre-pandemic levels, largely due to
the lack of office workers and international visitors. Consumer confidence among New York State residents,
though still fairly high, fell to its lowest level of the year in
September.
Wages have continued to grow strongly across all service
industries except finance, where wage hikes are reported
to be modest. A New York City employment agency
similarly noted that its clients—mostly financial service
firms—have been holding the line on wage gains. However, agencies in upstate New York reported sizable
wage increases. Looking ahead, businesses across all
major industries expect widespread wage hikes to persist.
An intensifying dearth of new vehicle inventories has led
to a sharp drop-off in sales. Most of the incoming inventory has already been pre-sold. Ongoing severe microchip shortages have constrained inventories of new
vehicles and replacement parts, and dealers expect this
situation to continue at least through the end of the year.
Prices
Firms continued to report broad-based escalation in input
prices—particularly in goods production and distribution
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Federal Reserve Bank of New York
with vacancy rates declining and leasing activity remaining
brisk, though a bit less so than during the summer. Rents
have continued to rebound, though a local industry expert
noted a striking divergence in Manhattan between the
lower and higher ends of the market—underscoring this
point, rents are up roughly 2 percent from 2019 levels in
doorman buildings but down roughly 15 percent in nondoorman buildings. A good deal of new apartment development (rentals and condos) is currently in the pipeline.
Moreover, the decline in new sales has also led to a
dwindling supply of used autos and a subsequent drop in
sales due to fewer trade-ins.
Manufacturing and Distribution
While wholesale trade businesses indicated some further
moderation in growth, manufacturers continued to report
fairly solid growth, and those in the transportation &
warehousing sector noted ongoing brisk growth. Contacts noted that their businesses have been increasingly
constrained by widespread supply delays and disruptions and worker shortages. Looking ahead to the next
six months, companies in these sectors remained widely
optimistic about business prospects, despite concerns
about labor shortages and supply bottlenecks.
Commercial real estate markets have improved somewhat
across the District. New York City’s office market, which
had been weakening steadily throughout the pandemic,
appears to have stabilized in recent weeks with availability
rates and asking rents leveling off. Across the rest of the
District, office vacancy rates were steady to slightly lower,
and rents were steady to up modestly. The industrial market continued to strengthen, with vacancy rates declining
to near record lows and rents rising at a 5-10 percent pace
across the District. The retail leasing market, in contrast,
has remained sluggish.
Services
Service industry contacts reported some deceleration in
activity to a modest pace of growth in recent weeks.
Contacts in the leisure & hospitality and information
sectors have become somewhat less upbeat about both
recent trends and the near-term outlook. However, businesses engaged in professional & business services and
education & health services remained positive about
future business prospects.
Both multi-family residential and non-residential construction starts have picked up further in recent weeks, and
there continues to be a substantial amount of ongoing
construction. However, industry contacts reported that
activity slowed somewhat in September, citing major delays in acquiring construction materials, as well as disruptions from tropical storm Ida in early September, which
caused extensive flooding. Still construction sector contacts continue to be cautiously optimistic about prospects
for the months ahead.
Tourism has continued to increase since the last report.
Rochester’s major convention center recently re-opened
to hosting major events, giving a lift to local tourism.
However, in much of upstate New York, a dearth of
Canadian visitors, due to the ongoing border closure,
has constrained growth. In New York City, tourism activity picked up in September, buoyed by the UN General
Assembly and the U.S. Open, as hotel occupancy rates
climbed to their highest levels since the start of the pandemic. While domestic leisure visitations are roughly
back to normal levels, business and international travel
to the city have remained moribund—the latter driven
largely by ongoing travel restrictions.
Banking and Finance
Businesses in the broad finance sector indicated that
activity has flattened out since the last report. Some contacts have expressed growing concern about cyber- and
ransom-ware attacks, both in their own industry and
among customers and borrowers. Small to medium-sized
banks across the District reported that loan demand was
flat overall—stronger for commercial mortgages and commercial & industrial loans but weaker for consumer loans
and residential mortgages. Refinancing activity remained
little changed, on net. Loan spreads narrowed for consumer loans and commercial & industrial loans. Credit standards and delinquency rates were little changed across all
categories. ■
Real Estate and Construction
Housing markets have been steady to slightly stronger,
on balance, in recent weeks. Sales activity picked up
noticeably across New York City, far exceeding prepandemic levels; the inventory of unsold homes receded
but remained higher than normal, especially in Manhattan. Across the rest of the District, sales activity slowed
somewhat, constrained by very low inventories. Home
prices continued to rise, approaching pre-pandemic
levels in Manhattan but far exceeding them across the
rest of the District.
New York City’s rental market has continued to rebound,
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
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Federal Reserve Bank of
Philadelphia
The Beige Book ■ October 2021
Summary of Economic Activity
On balance, business activity in the Third District grew modestly – a slower pace than during the prior Beige Book period. Moreover, activity in most sectors had still not returned to pre-pandemic levels. The rate of all persons being fully
vaccinated against COVID-19 was about 60 percent. However, COVID-19 cases rose throughout most of the period,
which was widely cited by contacts as prompting confidence to slump and activity to flag. Many firms reported imposing
vaccine mandates with relatively few resignations. Generally, contacts expressed greater concerns about ongoing supply chain disruptions and persistent labor shortages. Net employment continued to grow modestly, while prices and
wages rose moderately. About one-half of the nonmanufacturers and one-third of the manufacturers expressed positive
expectations for continued economic growth over the next six months – a further narrowing of optimism. Numerous firms
indicated that they had learned to produce with fewer employees and, therefore, did not expect to refill all prior positions.
Employment and Wages
ble with pre-pandemic levels. Only a few firms reported
lower compensation. Wage pressures remained high for
lower-wage jobs; one staffing firm wouldn’t accept new
clients that offer below $15 an hour. Wage pressures are
rising for higher-wage positions as well. One firm is now
offering up to $90,000 for a second-year CPA position
that might have commanded $65,000 before the pandemic.
Employment continued to grow modestly overall. The
share of firms reporting employment increases held
steady at one-fifth of the nonmanufacturing firms but
edged below one-third among the manufacturers. Overall, increases in average hours worked edged lower
among nonmanufacturers (to one-fifth) but rose among
manufacturers (to one-third).
Prices
Despite the return of children to school and the end of
enhanced unemployment benefits, staffing firms and
other contacts reported only a slight uptick in new applicants, at best. Many interview candidates were arriving
with other offers in hand. Firms are also working harder
to retain workers by raising wages. Contacts noted that
childcare issues, early retirements, and general burnout
continued to depress the labor supply.
On balance, prices continued to rise moderately over the
period. The share of manufacturers reporting higher
prices for factor inputs edged lower to about 70 percent,
while those receiving higher prices for their own products
remained near one-half. The share of nonmanufacturers
reporting higher prices for their inputs remained near
one-half, while the share receiving higher prices from
consumers for their own goods and services edged
lower to below one-fourth.
Apart from labor supply issues, many contacts do not
expect to employ as many workers for the same level of
output as they had before. Manufacturers, builders,
retailers, and hospitality managers all note that operational changes and automation are allowing their businesses to function with fewer workers.
About 60 percent 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. According to contacts
in manufacturing, construction, and finance, there is too
much uncertainty and too little labor to pursue capital
expansions that might address the product scarcity and
high prices resulting from the supply chain disruptions.
Wages continued to rise moderately. The share of nonmanufacturing firms reporting higher wage and benefit
costs per employee held steady at two-fifths – compara-
C-1
Federal Reserve Bank of Philadelphia
Manufacturing
growth was strong. Commercial and industrial loans
continued to contract significantly, while home equity
lines fell modestly. Auto lending, home mortgages, and
other consumer loans grew modestly, and commercial
real estate lending grew slightly. Credit card volumes
grew moderately – faster than the slight pace during the
same period in 2019.
On average, manufacturing activity continued to grow
moderately. However, while net increases of shipments
continued, new orders fell further from the prior period’s
level. Net backlogs and delivery times continued to increase, but among fewer firms. Net inventories rose
again after a brief period of decline.
Bankers, accountants, and bankruptcy attorneys continued to report few problems with bad debt. However, they
noted increased mergers and acquisitions, or closings,
as small business owners seek early retirement at increasingly younger ages. A dry cleaner closed on the
expectation that demand would not return. A bar owner
was worried because fewer people were staying between 10:00 p.m. and closing – a period that previously
provided a healthy percentage of its profits.
Contacts reported no end in sight to the ongoing supply
chain disruptions. Many firms reported long delays for
obtaining key factor inputs while also noting unreliable
delivery service of completed orders via their distributors.
Overall, production levels and employment remained
below pre-pandemic levels.
Consumer Spending
Retailers (nonauto) and restaurateurs reported slight,
incremental growth. Some noted that consumers had
retreated a bit as COVID-19 cases rose again. Supply
chain disruptions and labor shortages continued to limit
shelf inventories and hours of operation.
Real Estate and Construction
Homebuilders continued to note a slight decline in sales
but still describe the overall market as strong. The number of serious buyers remains limited by higher prices
and patience, as most current contracts are for delivery
in mid-2022. Existing home sales held steady with no
significant increase of new sellers, but somewhat less
frenzy from buyers. Multiple offers and cash deals are
still common but offers are not as high above asking
price as earlier.
Once again, supply chain issues were most severe for
auto dealers. Contacts reported that new car sales were
down sharply – inventories on dealers’ lots were numbered in single digits or the teens rather than dozens or
hundreds as is the norm. The disruptions were no longer
limited to microchips. Contacts noted numerous other
components that have been held up by plant shutdowns
and bottlenecks throughout the global supply network.
Construction activity for nonresidential projects ebbed
slightly. While warehouse, institutional, and multifamily
projects remain strong, the overall pipeline of new projects narrowed as uncertainty clouds the office market.
Likewise, while leasing activity was strong for industrial
and lab space, demand for office space fell. Expectations that some firms will downsize their workforces and
others will shift to more permanent remote workforces
are being realized as the office sublease market has
become more active. ■
Tourism continued to decline modestly. Contacts noted
that the Delta variant wave further delayed business
travel plans just as leisure travel entered its seasonal
downturn. While domestic tourism remained strong at
resort locations, contacts in various sectors noted that
conferences and trade shows were still being canceled.
Nonfinancial Services
On balance, nonmanufacturing activity grew modestly –
a bit slower than last period. The share of firms reporting
increases in sales and in new orders held steady; however, the share reporting decreases rose significantly.
Moreover, output remained below pre-pandemic levels
for most sectors. Even as some entertainment venues
reopened for the first time, other firms reported that
consumers had pulled back as Delta variant cases rose.
Many firms also delayed their return to the office; one
reversed its prior return.
Financial Services
The volume of bank lending (excluding credit cards) held
steady during the period (not seasonally adjusted); during the same period in 2019, by contrast, loan volume
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 ■ October 2021
Summary of Economic Activity
Economic activity in the Fourth District remained strong in recent weeks, although the pace of growth moderated somewhat amid persistent supply chain disruptions. Broadly speaking, demand for both consumer and business goods and
services remained solid, but contacts in some sectors suggested that product shortages were resetting customers ’
expectations. For example, one auto dealer said that customers weren’t coming into showrooms because they knew
inventories were limited, and a manufacturer said that demand for its products was shifting based on the availability of
close substitutes. On net, contacts expect demand for their goods and services to increase in coming months, but their
optimism has been moderating since early summer as supply disruptions intensified and COVID cases rose. That waning optimism was accompanied by lowered expectations for capital spending. Meanwhile, most contacts indicated that
input costs (labor and nonlabor) increased in recent weeks, and a majority had raised selling prices. Finally, in a now
familiar ref rain, labor demand remained solid, but many contacts continued to suggest that hiring was limited by a dearth
of job applicants.
bursement, and time off) to attract and retain workers.
Employment and Wages
Employment increased modestly in recent weeks. More
than 40 percent of our contacts reported increases in
staffing, and half said that employment was steady.
Many of those who reported no change said that they
would hire more workers if workers were available. Several contacts noted that turnover had increased. In f act,
some of those who reported declines in staffing said they
could not fill recently vacated positions. Many f irms said
worker shortages hindered their ability to meet demand,
thereby exacerbating supply chain disruptions. But one
auto dealer said that supply chain disruptions were
causing his labor challenges, adding, “nothing to sell
makes it hard to keep employees.” Contacts noted very
little change in labor availability since supplemental
unemployment insurance benefits programs expired and
many children went back to in-person instruction.
Prices
Nonlabor input costs continued to rise. Nearly threequarters of our contacts reported cost increases in the
prior two months, while a quarter saw no change. Reports of cost increases were widespread across industry
sectors but were most prominent in manuf acturing and
construction, in which supply chains were most disrupted. Many contacts in these sectors suggested that prices
were rising “across the board.” The remaining firms often
reported that just as some input costs decreased, others
rose, resulting in higher overall costs. Looking forward,
two-thirds of contacts expected costs to rise in the
months ahead because they did not anticipate meaningful relief f rom supply chain disruptions.
Selling prices continued to rise. Nearly 65 percent of all
contacts, and 75 percent of retailers, said they increased
prices in the prior two months. Many contacts argued
that they increased prices to protect margins amid rising
input and labor costs. However, others said that strong
demand conditions allowed them to raise prices and
boost margins. One manufacturer said that some of his
largest multinational customers had recently initiated
conversations with him offering “generous” price increas-
Heightened competition for workers pushed wages up
for more firms. Nearly 60 percent of contacts raised
wages recently, while the remaining 40 percent said that
wages had not changed. Increasingly, f irms raised wages to retain employees “as a preventive measure after
losing some to poachers,” as one contact stated it. In
addition, many firms reportedly enhanced other parts of
compensation (such as health insurance, tuition reim-
D-1
Federal Reserve Bank of Cleveland
es in order to secure delivery of product in the f uture. He
said this is the first time a customer has come to him
offering to pay higher prices.
tic that demand would remain robust, though many expressed concerns that persistent supply shortages could
delay projects and dampen activity.
Consumer Spending
Financial Services
Consumer spending increased modestly. General merchandisers and apparel retailers said that demand for
goods remained strong, and many noted solid back-toschool sales. Hoteliers and restaurateurs that cater to
regional leisure customers reported continued improvement in activity, though one hospitality contact said that
business travel continued to lag behind leisure travel.
Auto dealers reported a dip in sales despite generally
strong demand as tight inventories and higher prices
deterred some buyers. Contacts were optimistic that
nonauto consumer spending would continue to improve
in the coming months. However, auto dealers suggested
that sales will remain weak until inventory levels recover.
Banking activity increased modestly, although growth
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. While
business lending remained relatively soft, multiple contacts reported an improvement in demand and a stronger
loan pipeline. Lenders said that delinquency rates for
consumer and commercial loans were still low and that
the number of active forbearance agreements for each
continued to decline. Looking ahead, bankers were
optimistic that loan demand, especially business lending,
would continue to improve in the near term as the economy continues to grow.
Manufacturing
Professional and Business Services
Demand for manufactured goods grew strongly, though
manuf acturers’ ability to meet that demand varied by
sector. For example, steelmakers said that orders f rom
automakers fell as chip shortages constrained vehicle
production, while orders f rom agricultural equipment
manuf acturers rose as output in that sector increased.
Supply chain disruptions remained broad, motivating
some customers to order inputs ahead of time as a
precaution against future delays or price increases.
Some producers continued to sit on goods for which they
could not secure shipping or could not finish assembling
because of a shortage of labor or parts. On net, contacts
expected conditions to improve in coming months, although the continued shortage of microchips, rising materials prices, and inflation fears tempered expectations.
Demand for professional and business services remained robust as their clients’ outlooks for the overall
economy continued to improve. Technology f irms experienced robust demand as businesses furthered their
investments in technology software and solutions. The
need for authentication services also remained strong as
consumers continued to f avor remote transactions. Contacts expected demand to increase f urther throughout
the remainder of the year as more businesses look to
plan for the future and invest in additional technology.
Freight
Freight activity grew moderately f rom an already high
level both because of an increase in international trade
flows and continued economic recovery in the United
States. Contacts reported that continued shortages of
truck drivers and tractor trailers limited the sector's ability
to meet demand , fueling the poaching of workers f rom
competitors and preemptive wage increases. Looking
forward, there is general optimism that strong demand
will continue into next year and that carriers will maintain
their above-prepandemic levels of pricing power. ■
Real Estate and Construction
Demand for residential real estate and construction
remained strong. One real estate agent noted that home
sales experienced a typical seasonal slowdown in recent
weeks, but demand was stronger than usual for this time
of year. Homebuilders also reported that demand was
solid despite persistent supply chain disruptions that
have led to price increases and extended lead times.
Overall, contacts anticipated that activity would remain
robust throughout the remainder of the year.
Nonresidential construction and real estate activity continued to increase as firms revisited expansion plans
previously put on hold. One developer suggested that
many clients have begun to move forward with new
construction projects despite elevated prices to avoid
losing their market share. Overall, contacts were optimis-
For more information about District economic conditions visit:
https://www.clevelandfed.org/en/region/regional-analysis
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ October 2021
Summary of Economic Activity
The regional economy grew modestly in recent weeks. Firms across a variety of sectors noted that demand outpaced
their ability to meet it because of shortages in labor, finished goods, parts, and raw materials. Manufacturers saw a
slight slowdown in activity amid strong demand due to labor and input constraints. Ports and trucking companies continued to report robust volumes and difficulties delivering those shipments because of labor and equipment shortages.
Retail sales increased modestly and saw low levels of inventory, some of which were due to the microchip shortage.
Travel and tourism slowed slightly but remained strong, overall. Restaurants struggled to keep up with demand and also
faced challenges with the availability of labor and ingredients. Demand for nonfinancial services rose moderately and
firms struggled to meet demand amid labor and input shortages. Residential real estate demand remained strong, but
sales decreased modestly in recent weeks. Commercial real estate leasing rose modestly, with growth mainly coming
from the industrial and multifamily segments. Financial institutions saw modest growth in loan activity, overall. Employment rose modestly, but the demand for workers strengthened. On balance, wages grew moderately and employers
continued to offer bonuses to recruit and retain workers. Price growth held steady at an elevated rate.
Employment and Wages
Manufacturing
Total employment in the Fifth District rose modestly in
recent weeks. The demand for workers strengthened
from an already robust level, and employers increasingly
reported difficulties filling open positions. Many firms also
saw increased turnover, leading some to offer both monetary and nonmonetary incentives, such as flexible work
arrangements, to retain staff. A few employers expressed
concern that federally mandated COVID regulations,
such as vaccine requirements, could exacerbate their
workforce challenges. Average wages increased moderately as firms offered higher starting pay and increased
wages to recruit and retain staff. Many also continued to
provide sign-on and stay-on bonuses.
Fifth District manufacturers reported a slight slowing of
activity since our last report. While many manufacturers
still saw strong demand, labor constraints and shortages
of materials limited production. Long lead times and high
prices of inputs led some manufacturers to substitute
inputs or halt production of certain products. Additionally,
many manufacturers were unable to obtain packaging or
saw shipping delays on finished products. A cabinet
manufacturer reported that customers were not able to
accept orders on schedule because of construction
delays. Some manufacturers also reported that delays in
obtaining parts to repair machinery slowed production.
Prices
Fifth District ports saw strong growth in recent weeks, as
volumes continued to break records. Growth was largely
driven by imports, but exports grew as well. Imports of
furniture, food, and machinery showed especially strong
growth while agricultural products drove much of export
growth. While auto parts held steady, finished auto imports dropped amid the microchip shortage. One contact
noted that vessels normally used for finished new vehicles are now being used to ship trailers of goods. Port
operations were smooth on the vessel side, but delays in
inland transportation left imports sitting at the ports for
extended times. These delays were caused largely by
Ports and Transportation
Price growth was little changed in recent weeks but
remained significantly elevated on a year-over-year
basis. According to our surveys, service sector firms
reported, on average, slightly more than four percent
growth in their selling prices compared to last year. Services firms continued to report strong price growth for
inputs as well, but those prices moderated slightly in
recent weeks. Manufacturers, on the other hand, reported a slight increase in their selling prices and a sharp
increase for input costs.
E-1
Federal Reserve Bank of Richmond
shortages of chassis and drivers as well as rail delays
and warehouse space constraints. One contact noted
that companies are increasingly storing products on
chassis, exacerbating the problem.
delays getting new appliances, paint, or other materials
they wanted for improving homes before showing them.
Commercial real estate leasing increased modestly since
our last report. More companies looked to lease office
space, but many remained hesitant because of uncertainty surrounding space needs, and occupancy was
little changed. Rents held steady, and concessions and
incentives remained high, mostly consisting of free rent
at the beginning of a lease and increased tenant improvement allowances. Demand and rental rates for
industrial leasing remained high. Contacts reported rising
demand for restaurant space, as new restaurants
opened and existing ones added locations. Multifamily
leasing was strong, as landlords saw high occupancy
and rising rental rates.
Fifth District trucking companies reported moderate
increases in demand from already high levels since our
last report. Volumes were high in nearly all areas of both
retail and industrial shipping. Truckers were unable to
meet demand and had to turn away business from both
new and existing customers, as a shortage of drivers
constrained capacity. Some companies also struggled
with shortages of trucks and trailers as new vehicles and
repair parts were delayed.
Retail, Travel, and Tourism
Fifth District retailers reported a modest increase in
demand since our last report. However, lack of inventories often limited actual sales. Supply of automobiles
was especially low, which contacts attributed to the
microchip shortage. High prices led to record profits for
some auto dealers, but contacts believed profits were
not sustainable, as inventories continue to drop. Other
retailers also struggled with long lead times for and
limited availability of products as well as high shipping
costs. Supply chain disruptions disproportionately affected smaller retailers who were often unable to secure
containers for imports.
Banking and Finance
Overall, respondents reported that loan activity was
modest this period, with moderate growth in residential
mortgages amid continued low rates. Financial institutions indicated a slight increase in demand for commercial real estate and business loans, but noted that firms
are reluctant to make capital investments due to uncertainty related to the Delta variant and supply chain shortages. Auto lending has decreased due to lack of inventory on car lots. Deposit growth was moderate despite
many banks further lowering rates on interest-bearing
accounts. Credit quality remained excellent, but a few
respondents noted increased rate competition on loans.
Travel and tourism in the Fifth District were strong but
decreased slightly in recent weeks. The seasonal shift
from leisure to business travel led to this slowdown, as
many businesses have not resumed normal travel operations. Despite the slowdown, hotels saw strong bookings and high rates, but many limited services and the
number of rooms offered because of staffing shortages.
Restaurants also were unable to meet high demand and
had to cut operating hours because they did not have
enough employees. Many restaurants struggled with
availability of ingredients and were forced to change
their menus daily, depending on what ingredients they
received.
Nonfinancial Services
Nonfinancial services firms reported a moderate increase in demand in recent weeks, but many businesses
indicated that they were not able to fully meet demand
due to shortages of workers as well as shortages and
delays in receiving other business inputs. In many cases,
those shortages also led to higher costs. Community
college enrollment remained below pre-pandemic levels.
Meanwhile, nonprofit organizations generally saw strong
giving and were hiring, but they had to compete with forprofit companies for workers. ■
Real Estate and Construction
Demand for Fifth District homes remained robust but
decreased modestly in recent weeks. Realtors reported
they continued to get multiple offers on homes but fewer
offers than in the past year. Sale prices rose overall, but
sellers increasingly had to sell for under listing price.
Inventories and average days on the market were low
but increased somewhat as more homes came onto the
market. Builders continued to struggle with low inventories and supply chain disruptions that delayed construction. Many sellers of existing homes also experienced
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ October 2021
Summary of Economic Activity
Economic activity in the Sixth District expanded at a moderate pace from mid-August through September. Demand for
labor was strong, and worker supply remained extremely tight. Reports of wage increases, along with signing and retention bonuses, were widespread. Some nonlabor costs continued to rise, and pricing power improved. Retail sales activity strengthened, but the pace of new car sales slowed due to supply chain constraints. Domestic leisure travel activity
remained strong. Demand for housing was robust, inventories declined, and home prices rose. Commercial real estate
conditions were mixed. Manufacturing activity was robust, but production slowed as labor shortages caused more idle
time. Conditions at financial institutions were stable, and consumer and residential loan demand improved.
struction projects across sectors, with uncertainty around
expected completion timelines. Food prices also rose.
Contacts continued to note an ability to pass through
input cost increases. The Atlanta Fed’s Business Inflation Expectations survey showed year-over-year unit
costs were relatively unchanged in September at 3.2
percent, from 3.3 percent in August. Year-ahead expectations also remained generally stable at 3.1 percent in
September, compared to 3 percent in August.
Employment and Wages
District contacts continued to report strong demand for
labor and the supply of available workers remained
extremely tight. Turnover increased as staff left jobs for
higher wages, greater flexibility, and better work environments. At the same time, the number of retirements
increased. A few firms noted that recent surges in
COVID-19 cases caused higher rates of absenteeism
than in previous waves. Several employers said they
have been forced to make daily evaluations on which
operations can be supported based on the number of
employees who came to work. The most severe shortages were among hospital nurses who were noted as
migrating to other practices where they can have a stable schedule, or to traveling positions where they can
earn multiples of their prior hourly rate. Most employers
shared that they would like to implement COVID-19
vaccine mandates but were concerned about losing
employees. Worries about employee mental health,
burnout, safety, and vaccine mandates impacting company culture were mentioned.
Consumer Spending and Tourism
District retailers reported strong demand since the previous report. However, several cited missed sales opportunities due to of a lack of inventory and persistent labor
shortages that resulted in reduced hours of operation.
The pace of new vehicle sales continued to slow due to
supply chain constraints.
Domestic leisure travel continued to drive tourism activity
for much of the District, though occupancy at limitedservices hotel properties declined due to a rise in COVID
-19 cases and the start of school. In New Orleans, tourism plummeted following Hurricane Ida; however, the
city has since opened, and contacts expect activity will
improve over the balance of the year. Some contacts
indicated further deterioration in business travel and
convention bookings due to rising COVID-19 cases and
expressed uncertainty over the next three months.
Upward pressure on wages intensified over the reporting
period and reports were relatively widespread. Several
contacts mentioned that escalating living expenses have
become a part of wage negotiations. Wage increases
continued to be noted along with signing and retention
bonuses. Employers were offering greater flexibility to
retain and attract workers when possible and several
noted new hires negotiating for more paid time off.
Construction and Real Estate
Demand for housing throughout the District remained
strong, though activity moderated slightly from record
highs. Real estate contacts noted multiple offers on
properties for sale. On a year-over-year basis, inventory
levels declined, and home prices rose by double digits in
most markets. Declining home ownership affordability
Prices
District contacts reported persistent increases in some
nonlabor costs. In particular, steel and freight costs rose
markedly. The volatility of these and other input costs,
exacerbated by supply chain constraints, delayed con-
F-1
Federal Reserve Bank of Atlanta
charge-offs.
was a growing concern for some buyers, resulting in
more moderate growth in sales and declining homebuyer
sentiment. The decline in affordability was widespread,
with markets in Central and South Florida experiencing
the sharpest decline in the District.
Energy
Energy industry contacts reported damage to infrastructure servicing production in the Gulf of Mexico as a result
of Hurricane Ida. However, some indicated that resiliency efforts made since Hurricane Katrina in 2005, including the hardening of energy infrastructure and investments in diesel-driven power generation, accelerated the
recovery. Reduced oil and gas output was primarily
attributed to challenges in redeploying workers since
reentry into some communities was difficult or impossible
after the storm. However, collaboration with private
entities and state government helped alleviate immediate
post-hurricane labor tightness. Some contacts expressed
concern about short-term natural gas supply and pricing
pressures resulting from reduced output. Further, reduced investment in oil and gas exploration and production in recent months is anticipated to result in long-term
cutbacks in supply. Utilities contacts continued to cite
strengthening residential, commercial, and industrial
sales, as well as significant investment in renewables,
particularly wind and solar power.
Commercial real estate activity was mixed. Conditions in
the multifamily sector improved notably from last year,
though there was growing uncertainty regarding future
effects from the end of the eviction moratorium. Activity
in the retail segment continued to improve. The office
sector remained challenged as employers expressed
uncertainty about future space needs. Negative rates of
absorption and new deliveries pushed office vacancies
upward. Contacts report that competition is accelerating
among CRE lenders. Smaller banks and non-bank lenders have been identified by market contacts as some of
the more aggressive CRE lenders.
Manufacturing
District manufacturers reported robust demand over the
reporting period. However, materials shortages and
longer supply delivery times continued to slow production, and some firms experienced increased down time
due to higher absenteeism caused by COVID-19 illnesses. Several manufacturers anticipate further strengthening in demand but expressed uncertainty about future
production levels.
Agriculture
Agricultural conditions remained mixed. Widespread rain
kept the District free of drought, but left parts of the
District in abnormally moist to excessively wet conditions. Producers continued to assess damages from
Hurricane Ida; initial estimates indicated damage to row
and vegetable crops, sugarcane, timber, livestock, and
infrastructure. On a year-over-year basis, production
forecasts for corn, soybean, peanut, and cotton crops
were up while rice and sugarcane forecasts were down.
The USDA reported year-over-year prices paid to farmers in August were up for corn, cotton, soybeans, cattle,
broilers, and eggs, but down for rice and milk. On a
month-over-month basis, prices were up for corn, rice,
cattle, broilers, and eggs but down for cotton, soybeans,
and milk. ■
Transportation
Activity in the transportation sector strengthened, on
balance, since the previous report. Logistics contacts
reported robust demand as the peak shipping season
commenced. East coast ports saw record container
volumes. However, growing numbers of container ships
idled off the coast, as short supplies of chassis, trucks,
and labor slowed throughput. Operations resumed for
Gulf coast ports after Hurricane Ida caused shutdowns
due to damaged facilities and power outages. Air cargo
contacts reported a resumption of cargo-only flights to
capitalize on bottlenecks at ports. Contacts expect gridlocks at ports and other supply chain disruptions to continue into 2022.
Banking and Finance
Conditions at District financial institutions remained
stable. Margin pressures persisted as a result of the low
interest rate environment, weak loan growth, and elevated liquidity. Loan balances declined for multiple loan
portfolios, including commercial and industrial loans.
Banks reported improvements in consumer and residential loan demand. Deposit levels remained high but
growth moderated, causing some institutions to increase
short-term borrowings. Asset quality remained healthy
without notable increases to nonperforming loans or
For more information about District economic conditions visit:
www.frbatlanta.org/economy‐matters/regional‐economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ October 2021
Summary of Economic Activity
Economic activity in the Seventh District increased modestly in late August and September, and contacts expected
growth to continue at that pace in the coming months. Labor and materials supply constraints as well as the spread of
COVID-19 continued to weigh on the expansion. Employment, manufacturing, and business spending grew moderately,
but consumer spending and construction and real estate were little changed. Wages and prices increased strongly while
financial conditions were flat. District corn and soybean harvests were larger than expected and near record levels.
Employment and Wages
Prices
Employment increased moderately over the reporting
period, and contacts expected a similar pace of growth
over the next 12 months. Contacts across sectors reported continued difficulty in finding workers at all skill levels,
though a few contacts noted an uptick in the number of
job applicants. Some businesses, particularly in the
restaurant and manufacturing sectors, continued to limit
operating hours because of a lack of workers. Contacts
pointed to childcare challenges, retirements, COVID-19
health safety concerns, and vaccination requirements as
factors limiting labor supply. Many contacts indicated
that they were delaying the return to in-person work
because of high numbers of COVID-19 cases. In addition, absences due to COVID-19 exposure were higher
than a few months ago. Overall, wage and benefit costs
increased strongly. A scarcity of applicants for open
positions led numerous contacts to raise wage offers,
and many reported giving additional pay raises on top of
regular annual increases to retain their existing workforce. Some contacts said they did not hire applicants
because asking wages were higher than their business
models could support. There were reports of workers
shifting sectors to pursue higher compensation and
preferred working conditions.
Overall, prices rose strongly in late August and September, though contacts expected increases to slow to a
moderate pace over the next 12 months. There were
large increases in producer prices, driven by
passthrough of higher materials, energy, labor, and
transportation costs. A few contacts noted that they were
changing prices more frequently than usual. Consumer
prices moved up robustly overall. Contacts pointed to
solid demand, limited inventories, increased costs, and a
greater ability to pass cost increases on to customers as
sources of the higher consumer prices.
Consumer Spending
Consumer spending was little changed over the reporting period, but remained at a high level. Spending on
leisure and hospitality declined, especially at hotels and
restaurants. In contrast, nonauto retail sales increased
moderately. Contacts indicated that demand for furniture
and home furnishings, appliances, and electronics remained robust. Spending for home improvement and
groceries was flat but continued at high levels. Light
vehicle sales decreased somewhat, as declines in new
vehicles outweighed a rebound in used vehicle sales.
Auto dealer profit margins remained high but dropped
further from their summer peak. Contacts reported that
ordering vehicles according to customers’ preferences
G-1
Federal Reserve Bank of Chicago
was likely to become standard practice, allowing for
lower dealer inventories. Auto service and parts sales
were reported to be up moderately.
materials limited production, leading to some order cancelations for auto parts suppliers. Demand for heavy
machinery grew moderately, led by higher sales in the
agriculture and construction industries. Heavy truck
demand was strong, particularly for used trucks. Contacts reported higher steel demand from most industries,
particularly for specialty products. Steel service center
inventories increased, but were expected to stay below
pre-pandemic levels over the long term. Building materials demand remained solid, supported by homebuilding
and remodeling projects.
Business Spending
Business spending increased moderately in late August
and September. Retail inventories remained at low levels
in numerous sectors due to supply chain bottlenecks,
and contacts expected the issues to continue into the
second half of 2022. New and used light vehicle inventories were incredibly low, as auto production remained
hampered by supply constraints. In manufacturing, forsale inventories were very low, and there were shortages
of a wide range of inputs including certain metals, plastics, and microchips. Demand for transportation services
remained elevated, with many contacts reporting continued domestic and international shipping delays. Capital
expenditures increased moderately, and contacts expected a similar pace of expansion over the next twelve
months. Commercial and industrial energy consumption
was flat but remained higher than pre-pandemic levels.
Banking and Finance
Financial conditions were flat on balance over the reporting period. Participants in equity and bond markets reported little net change in conditions. Business loan
demand was also about the same, with contacts reporting continued strong demand for M&A loans. Business
loan quality was unchanged overall, though standards
loosened somewhat. In consumer markets, there was a
mild increase in loan demand. Contacts noted that residential mortgage activity continued to be strong. With alltime low delinquency rates in the housing, auto, and
credit card markets, both loan quality and standards
were unchanged.
Construction and Real Estate
Construction and real estate activity was similar to that of
the prior reporting period. Residential construction was
unchanged, as shortages of materials and labor continued to slow projects. Residential real estate activity was
also little changed. Home sales were flat, while prices
increased moderately. One contact pointed to rising
inventories as a source of cooling price growth. Rents
were up modestly, and contacts noted that signing bonuses were now lower than before the pandemic. Nonresidential construction activity increased slightly.
Growth was concentrated in the industrial segment, with
contacts highlighting strong demand for facilities to
house inventory close to company operations and customers. In contrast, office construction was reportedly
weaker. Commercial real estate activity was unchanged.
Leasing and sales of industrial and multi-family properties remained steady at high levels. Meanwhile, leasing
and sales activity within the office segment remained
substantially below pre-pandemic levels. That said, office
property showings increased in recent weeks, and some
offices moved to new spaces to avoid the costs of reconfiguring to accommodate COVID-19 protocols.
Agriculture
In spite of drought in some areas, corn and soybean
harvests in the District were larger than expected and
near record levels. More plentiful supplies of both crops
were putting downward pressure on prices. That said,
corn and soybean prices were higher than a year ago.
Cattle prices were flat, while milk prices recovered some.
Facing higher feed costs, dairy farm margins tightened.
Rising energy prices and logistical problems were creating concerns about the cost and availability for 2022.
Farmland prices and rents continued to grow. Cash from
government programs and product sales were holding
back demand for agricultural lending. ■
Manufacturing
Manufacturing production grew moderately in late August and September, and contacts reported growing
order backlogs. The majority of manufacturing contacts
indicated that business was at or above pre-pandemic
levels, with most running at full capacity subject to ongoing labor and logistical challenges. Auto output remained
flat at low levels as shortages of microchips and other
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ October 2021
Summary of Economic Activity
Economic conditions have continued to improve at a moderate pace since our previous report. Contacts continued to
cite labor shortages and supply chain disruptions as primary issues. Increased input costs have led to cost pressures
across industries, and firms with the power to do so reported passing along these costs to their customers. Consumer
spending has remained steady since our previous report. Residential real estate inventories increased slightly, but
prices re-mained high. Industrial real estate has experienced strong growth, with major projects launched around the
District. Banks reported declines in lending activity due to increased uncertainty related to the COVID-19 Delta variant.
Employment and Wages
Prices
Employment has increased modestly since our previous
report, with widespread hiring attempts hindered by the
continuing labor shortage. Firms reported various strategies to attract scarce workers. Some redesigned open
positions to be more attractive; others held job fairs;
others turned to offshoring; and many reported sign-on
and retention bonuses. One large retailer planned to
raffle off a car to seasonal employees with good attendance. Several firms emphasized a new focus on students and young workers: One contact at a transportation technical institute remarked that, in contrast to typical years, every student graduating this year has already
found a job. Other contacts simply reported adapting to
worker shortages—automating jobs, cutting down on
business hours, or turning to contractors as necessary.
One Indiana school district, lacking bus drivers, temporarily returned to remote learning.
Prices have increased moderately since our previous
report. Contacts across industries reported increased
input costs. Some industries, such as construction, have
been able to pass these cost increases to consumers,
whereas contacts in the healthcare industry noted difficulty passing along increases in input costs. One contact
noted double-digit price increases on farming equipment.
In the construction industry, contacts reported lower
lumber prices but noted the high cost for items such as
steel and shingles. One contact reported that steel suppliers will honor discussed prices only for a day.
Consumer Spending
General retailers, auto dealers, and hospitality contacts
reported that activity has been unchanged since our
previous report. September seasonally adjusted credit
and debit card spending increased in Illinois, Indiana,
Mississippi, and Missouri relative to August and decreased in Arkansas and Tennessee. In West Tennessee, consumer perceptions of the current economic
situation declined slightly and expectations for the future
of the economy declined significantly. Auto dealers and
restaurants continued to report that supply chain issues
and labor shortages are restraining sales. A truck dealer
reported record demand and all-time high profitability. A
St. Louis hospitality contact reported that revenue per
Wages continued to increase strongly in the tight labor
market, with small firm wages rising more slowly. One
real estate contact reported giving employees raises
every pay period, which they feared was unsustainable;
an agriculture employer reported that a 20% wage increase still left them with significantly fewer workers than
they wanted.
H-1
Federal Reserve Bank of St. Louis
available room exceeded 2019 levels in early October for
the second time since the pandemic began.
not returned to pre-pandemic levels. One contact reported companies are more willing to sign leases but are still
wary of signing full five-year lease contracts. There is
very little financing available for office space, which is
causing delays as landlords and tenants disagree over
who should pay for repairs and improvements. The
market for retail space struggled last year, but demand
has improved rapidly since February. A contact in the
healthcare sector noted that rising construction prices
are hindering infrastructure updates for rural hospitals.
Manufacturing
Manufacturing activity has seen a moderate increase
since our previous report. Firms in both Arkansas and
Missouri reported upticks in new orders and production,
although the rate of growth has slowed slightly. Supply
chain delays and availability have continued to be issues, affecting the prices of intermediate goods in steel,
concrete, and timber. Manufacturers are beginning to
explore producing these goods domestically to address
shortages. Contacts are still optimistic about future
growth but remain concerned over global supply chains
and wage inflation. The industry is undergoing significant
physical expansion in the District, with plans for a paper
mill in Henderson, KY, battery plants in Kentucky and
Tennessee, and a speculative industrial warehouse in
St. Louis.
Banking and Finance
Banking conditions have worsened slightly since our
previous report. Contacts noted a pause in lending activity due to uncertainty surrounding the Delta variant. Consumer, commercial, and industrial loans declined moderately, while real estate loans increased modestly. A
contact in Kentucky reported strong growth in residential
real estate lending due to higher construction costs.
Delinquency rates remained low, but some lenders are
concerned that delinquencies will increase as unemployment benefits have expired. Loan pricing remained competitive, and multiple contacts cited concerns over elevated deposit levels and interest margin compression.
Nonfinancial Services
Activity in the nonfinancial service sector has increased
slightly since our previous report. Airport passenger
traffic remains near 80 percent of pre-pandemic levels
due to strong leisure travel; several airport contacts were
optimistic about business travel as more firms return to
in-person work. Several transportation contacts noted
that demand is strong, but shortages of shipping containers and barges remain an issue. A healthcare contact
noted that, while revenue has improved since this time
last year, surgery and emergency room revenues have
not returned to pre-COVID levels. Several healthcare
contacts mentioned that hospitals are busy, in part due
to COVID patients, and face staffing issues.
Agriculture and Natural Resources
Agriculture conditions have slightly improved since our
previous report. Overall crop yields have increased
moderately over the previous year. Contacts are very
optimistic about the current conditions in the District.
Farmers have reported a strong harvest season combined with high prices, which have contributed to a
strong season overall. Hurricane Ida caused some slight
delays but was not a major disruption to the District’s
agribusiness. There is, however, some concern about
rising input prices, global supply chain disruptions, and
the lack of labor necessary for both low- and high-skilled
agriculture work. ■
Real Estate and Construction
The residential real estate market has remained strong
since our previous report. Inventory remains restricted,
but there are some increases in inventory across all
price ranges. Prices remained steady, but there are
fewer bidding wars and some price reductions. Residential construction has remained strong since our previous
report, but the industry is struggling with supply chain
shortages and retaining workers. Many input materials
continued to have extended lead times. Some buyers
who purchased a property and planned to build on it
have elected to delay construction until supply chain
issues are resolved.
The commercial real estate market has remained mixed
since our previous report. Industrial real estate remains
strong, and many major firms are buying build-to-suit
and spec industrial space across the District. The office
market is improving, but prices and vacancy rates have
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ October 2021
Summary of Economic Activity
The Ninth District economy grew moderately since late August. Employment saw moderate growth, with hiring demand
continuing to outpace labor availability. Wage pressures were strong, while price pressures increased slightly from an
already elevated level. Growth was noted in commercial construction and manufacturing, while consumer spending,
commercial real estate, and energy activity were stable. Residential construction and real estate activity decreased,
while agricultural conditions deteriorated. Business activity reports were mixed among minority- and women-owned
businesses.
Employment and Wages
Worker Experience
Employment saw moderate growth since the last report,
with hiring demand continuing to outpace labor
availability. Job postings rose further in September in
District states, and recent surveys and sector contacts
report strong hiring demand. At a September business
conference in west-central Minnesota, “every person …
raised their hand saying that they are currently trying to
hire people,” according to a workforce contact.
Minnesota staffing firms reported that both total clients
and job orders were up; placements were also higher,
but unfilled job orders were rising even faster. Firms
continued to struggle finding labor. Overall, Minnesota
staffing firms reported a modest increase in labor
availability after pandemic-era unemployment benefits
stopped. However, other business workforce contacts
reported little increase in labor supply. Federal vaccine
mandates were expected to exacerbate labor problems,
though in most cases the number of quits induced by the
mandate has been smaller than anticipated.
Labor supply remained tight across the District. Initial
unemployment claims in District states in September
were flat overall compared with August; however, recent
levels were still 70 percent higher than similar prepandemic levels. Continuing claims fell about 20 percent
over this same period in the District, but remained
elevated, particularly in Minnesota and Wisconsin. Labor
contacts in the construction trades reported strong
enrollment in apprenticeships for workers to be trained
as drywall installers, electricians, and iron workers.
According to a labor contact, employment of sheet metal
workers was “pretty much normal for this time of year.” A
workforce development contact said some companies
have adopted more flexible and tolerant practices to
retain existing employees; for example, one company
has provided means for workers to observe their
religious practices. The absence of large conferences
and meetings continued to affect hospitality workers.
Lack of child care or reliable transportation, fears over
COVID exposure, and uncertainty with school schedules
continued to influence people’s employment decisions.
Wage pressures were strong. A majority of firms across
several surveys reported wage increases of 3 percent or
more. Wage increases were strongest in retail,
hospitality, health care, and construction. A North Dakota
retail contact noted that recent wage growth was strong
and that “the highest increase was at the lowest-paying
jobs.” However, contacts also noted that higher wages
were not always attracting more applicants.
Prices
Price pressures increased slightly from an already
elevated level since the previous report, while prices for
certain inputs eased. Surveys and comments from
contacts indicated that firms were passing more of their
input costs through to final prices. Half of respondents to
I-1
Federal Reserve Bank of Minneapolis
a survey of Ninth District firms characterized their
nonlabor input costs as up significantly in the third
quarter, while about a fifth said they had increased their
output prices significantly. Contacts in manufacturing
continued to report significant price increases for metals,
electronic components, and shipping, while other
contacts reported that the pace of increase had slowed
recently, though prices remained much higher than a
year ago. Retail fuel prices increased slightly in most
District states since the previous report.
activity in new multifamily construction. Retail contacts
reported improved conditions; a mall contact noted an
increase in store openings and overall leasing, though
rent levels and lease terms “continue to be a challenge.”
Residential real estate conditions softened slightly.
Closed sales in August and September were lower in
many locations compared with last year due to tight
inventory and rapidly rising prices.
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 September relative to the
previous month. Several contacts reported record
performance in the third quarter, even though supply
chain problems were constraining their ability to meet
demand. Regarding input cost pressures, one
respondent commented, “Passing along rising prices
does not seem to be denting demand.”
Consumer Spending
Consumer spending was flat overall since the last report,
sustaining a high overall level, but held back by low
product inventories and some evidence that the delta
variant was negatively influencing some consumer
behavior. Hospitality and tourism firms reported strong
activity through the end of summer, but many were more
cautious regarding their fall outlook. Convention and
other large-group activities have reportedly softened just
as the sector was seeing some growth. A large
Minnesota resort said it was seeing more inquiries on
large group events “until delta hit, and then I think it
shook people’s confidence again.” Labor difficulties,
supply chain problems and higher input prices were also
forcing many restaurants and other retailers to pull back
on hours and even days of operation. Retail contacts
reported solid demand but also delays in product
delivery and sometimes receiving less than ordered.
Agriculture, Energy, and Natural Resources
District agricultural conditions deteriorated somewhat
since the previous report. While producers continued to
benefit from solid commodity prices, most of the District
remained in severe or worse drought condition. Yields
and production of wheat and other small grain crops in
District states for 2021 will be sharply lower than the
previous year. Most of the District’s corn and soybean
crops were rated in fair or poor condition. District oil and
gas exploration activity was unchanged since the
previous report. District iron ore mines continued to
operate at full capacity.
Construction and Real Estate
Commercial construction grew moderately since the last
report, despite continued challenges. Industry data
showed that new project starts grew across District
states toward the end of summer. Available permit data
also showed growth in August and September compared
with last year in many of the District’s larger cities.
Sector contacts, however, continued to note concern
over higher input prices, supply chain disruptions, and
labor constraints which, in turn, have increased project
delays and negatively affected demand. Residential
construction fell slightly, with single-family permits falling
in September compared with last year in many markets.
Contacts said rising input prices were beginning to have
material effects on project timelines, cancellations, and
new demand, and the sector in general was slowing from
very strong levels earlier in the year.
Minority- and Women-Owned Business Enterprises
Business activity reports were mixed among minorityand women-owned business enterprises (MWBEs) in the
region. Tight labor markets continued to put pressure on
MWBEs, and some found it difficult to compete with the
higher wages offered by larger businesses. “We cannot
find enough workers, and short staffing is impacting our
productivity,” said an entrepreneur. Three-quarters of
respondents to a recent survey targeting MWBEs said
that their input costs were higher, and almost half
reported having increased prices for their final products
or services. Entrepreneurs expressed caution as the
delta variant has disrupted momentum in the recovery
and uncertainty as the immediate future has become
harder to predict, but they also raised their need and
willingness to innovate and adapt. Some expected an
increase in capital expenditures in the next quarter. ■
Commercial real estate was flat overall. Office
subleasing and vacancy rates increased in many
markets as larger firms continued to reconsider their
space needs. However, multifamily markets were
healthy, with vacancy rates holding or declining in many
markets while rents saw solid increases despite strong
For more information on the Ninth District economy, visit:
minneapolisfed.org/region‐and‐community
I-2
Summary of Economic Activity
Employment and Wages
Prices
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Consumer Spending
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Manufacturing and Other Business Activity
Banking
Energy
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Real Estate and Construction
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Agriculture
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J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ October 2021
Summary of Economic Activity
Solid expansion continued in the Eleventh District economy, though COVID-19 and labor and supply-chain constraints
remained headwinds. Growth in the manufacturing and nonfinancial services sectors was strong, and retail sales rose at
an average pace. Home sales were steady at elevated levels. Overall loan volumes rose broadly, and the energy sector
continued to experience robust growth. Agricultural conditions were quite strong. Employment growth was robust, and
wage growth remained highly elevated amid widespread labor shortages. Notable price increases were seen across
sectors, with contacts noting that ongoing supply-chain disruptions continued to drive up costs. Outlooks improved, with
most contacts expecting stronger business six months from now, though uncertainty increased.
turing sector, followed by oil and gas support services
and retail. Supply-chain bottlenecks were widely cited as
a key factor driving up costs. Many contacts reported
passing on at least a portion of the higher costs to customers, though some noted their profit margins continued to be pressured by selling price increases not
matching cost increases. Contacts in the construction
industry noted elevated but fairly stable input costs overall, with declining lumber costs offsetting rises in other
materials. Looking ahead, most contacts expect elevated
price increases to continue for at least the next six
months.
Employment and Wages
Employment expanded robustly overall, though job
growth moderated slightly in the service sector. Hiring
picked up in manufacturing, energy, and retail despite
continued reports of difficulty finding workers. These
labor shortages continued to pervade other industries as
well, perhaps most acutely for entry-level workers. Numerous firms said restrained headcounts were hampering expansion plans or even the ability to meet current
demand. Some contacts noted delays and difficulties in
bringing workers back onsite, either due to the resurgence of COVID-19 or increased pushback from employees to remain remote. Some staffing services contacts
expect recruiting to become easier in upcoming months
now that federal unemployment benefit programs have
ended.
Manufacturing
Robust expansion continued in the Texas manufacturing
sector, though the vast majority of firms noted supplychain disruptions or delays. In many cases these disruptions have been going on for a while, and firms have yet
to see relief—nearly 90 percent say supply issues are
the same or worse now versus a month prior. Despite
these challenges, output growth was widespread across
sectors, led by nondurable goods manufacturing, primarily food and chemicals. Optimism waned amid rising
uncertainty and continued labor and supply-chain constraints, though a majority of contacts still expect higher
output six months from now.
Wage growth remained highly elevated, and numerous
contacts said they were having difficulty filling vacancies
even at much higher wages. Multiple contacts cited entry
-level wage increases of 15 to 20 percent over the past
six months.
Prices
Prices continued to rise strongly, with upward pressure
on both input costs and selling prices holding near historically high levels. Input costs rose fastest in the manufac-
K-1
Federal Reserve Bank of Dallas
Retail Sales
was mixed, but availability of sublease space and vacancies remained high, with little improvement expected in
the near term. Activity in the retail space market was
generally positive since the last report. Investment sales
activity was elevated for industrial and multifamily properties.
Moderate sales growth continued in the retail sector.
Growth was led by wholesalers, while auto dealers continued to report declining sales amid particularly acute
supply-chain issues and tight inventories. Numerous
contacts said transportation problems—a shortage of
containers, trucks, and truck drivers—were exacerbating
other supply-chain issues like limited product availability
and extended lead times. Outlooks were slightly more
bullish than six weeks ago, but retailers note it will take
time to get out of the supply issues they are experiencing.
Financial Services
Loan demand growth remained solid, pushing up overall
loan volumes. Residential real estate loans led volume
growth over the past six weeks, followed closely by
commercial real estate, and commercial and industrial
lending picked up notably from the prior period. Nonperforming loans continued to decrease, and credit standards and terms remained largely unchanged. According
to financial industry contacts, general business activity
continued to increase, though respondents cited concerns that supply-chain disruptions, labor shortages, and
the Delta variant were disrupting businesses and increasing uncertainty. Outlooks for loan demand and
broader business activity six months from now remained
optimistic.
Nonfinancial Services
Texas service sector activity continued to grow at a
slightly above-average pace, with revenue growth
strongest among professional, scientific and technical
services firms. Solid revenue growth was also seen in
the health care sector after some weakness in prior
months. Leisure and hospitality firms saw a decline in
revenues over the reporting period, citing cancellations
and slowed business due to the Delta variant. Staffing
firms reported strong demand across industries, with
particularly robust demand in healthcare, construction,
and information technology. An airport said summer
passenger volume in 2021 was more than double that of
2020, but down about 15 percent from summer 2019.
The contact also noted that August domestic ecommerce
air cargo volumes were higher than any August in the
past 20 years, though international cargo volumes have
yet to recover to pre-pandemic levels. Shipping cargo
volumes at Texas ports also pushed to a record high in
August, driven by increased consumer spending and
retailers trying to build up inventory. Overall, outlooks
remained strong with most firms expecting higher revenues six months from now, though uncertainty continued
to creep higher.
Energy
Elevated growth continued in the oil and gas sector.
Optimism improved among contacts, spurred by higher
oil and natural gas prices, though supply-chain problems
continued to worsen. Contacts said current prices are
conducive to increasing production, and drilling and well
completion activity rose steadily over the past six weeks.
Orders for new equipment were up, though availability is
narrower, lead times longer, and prices higher. Looking
ahead, contacts expect rising production and noted more
upside risk than before.
Agriculture
Soil conditions remained mostly adequate in Texas,
though drought conditions persisted in parts of southern
New Mexico. Crop conditions were quite favorable,
boosting expectations for substantially higher production
this year than last across a variety of crops, including
cotton, sorghum, and corn. Agricultural prices generally
softened slightly over the reporting period. Pasture conditions were fair to good, and promising soil moisture
conditions for the planting of winter wheat increased
optimism for crop performance. ■
Construction and Real Estate
Housing demand remained strong. Contacts noted that
sales were levelling off at above-average levels, in part
due to tight inventories, buyer hesitancy and declining
affordability. Home price appreciation moderated, but
land and lot prices continued to accelerate. Labor challenges and supply shortages remained widespread,
resulting in delays in lot development and home closings. Builders’ margins have widened, however, and
outlooks were optimistic.
Apartment demand increased further, with leasing activity rising in both urban and suburban locations. Annual
rent growth was at a record high in many Texas markets.
For industrial properties, contacts noted robust growth in
demand and construction. Net absorption of office space
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ October 2021
Summary of Economic Activity
Economic activity in the Twelfth District strengthened moderately during the reporting period of mid-August through
September. The overall price level moved up notably, driven by increases in transportation and input costs. Conditions
in the labor market tightened further as modest increases in employment were accompanied by strong upward wage
pressures in almost all sectors. Retail sales moderately expanded while activity in consumer services slowed down
somewhat. Conditions in the agriculture and resource sectors as well as the manufacturing sector strengthened somewhat, as consumer demand remained solid. Activity in the residential real estate market expanded at a strong pace,
while commercial real estate activity was largely subdued. Lending activity picked up further over the reporting period.
Employment and Wages
Prices
Conditions in the labor market remained tight while
overall employment levels expanded modestly. Demand
for workers continued to be exceptionally strong. Contacts across the District reported having substantial
difficulties finding qualified candidates, particularly for
lower-skilled positions. Industries reporting the tightest
constraints included hospitality, retail, and food services.
In fact, a few contacts in these sectors noted that they
did not see any significant improvement after the expiration of supplemental benefits or the start of the school
year. Worker shortages were also noted in manufacturing, higher education, nonprofit organizations, and financial institutions. Most contacts mentioned needing longer
time for filling open positions, although some reported
they were having an easier time finding remote workers,
especially those from nonurban areas.
Prices moved up notably over the reporting period. Construction material costs, such as steel, asphalt, and
wallboard, increased sizably. Lumber prices, despite
receding and stabilizing during the summer months,
started noticeably increasing in some areas recently.
Robust demand for the regions’ agricultural products
together with lower crop yields continued to drive food
prices up. Additionally, price pressures arose from increased transportation, energy, and labor costs. One
banking sector contact noted rising labor costs as having
the biggest impact on their business and prices.
Retail Trade and Services
Sales of retail goods, notably for food and beverage,
picked up over the reported period. Several contacts
mentioned strong e-commerce sales. High demand,
labor shortages, and supply chain disruptions have kept
inventories low, in some cases restricting retailers from
meeting consumer demand. Sales of vehicles and electronics were hindered by semiconductor shortages and
other ongoing disruptions to inventory building.
Wage growth climbed further due to intensified competition for talent and workers’ willingness to switch jobs,
with one contact from the banking sector characterizing it
as a wage war. Apart from increasing starting salaries as
much as 20 percent by some employers’ estimates, most
contacts across sectors reported offering hiring bonuses,
gift cards, and other incentives. Conversely, wages in
the entertainment and energy sectors remained mostly
flat. In addition, an entertainment industry contact in
California reported an upcoming union vote to decide
whether its members will go on strike to oppose low
wages and long working hours.
Activity in the consumer and business services sectors
slowed down somewhat. Although demand in travel,
leisure and hospitality, and food services had been rising, the recent spike in Delta variant cases has dampened growth in these sectors. Hospitality services related
to business travel also continued to underperform. One
contact noted many reservations were cancelled as inperson business events were switched to only being held
L-1
Federal Reserve Bank of San Francisco
virtually. On the supply side, reports across the District
noted that labor shortages in hospitality and food services have constrained business capacity. One contact
reported that many hotel rooms remained vacant due to
the lack of staff to service them. Demand for health-care
services remained high, particularly for COVID-19 testing. Several contacts noted an increase in clinical volumes especially due to pent-up demand for elective
procedures that had been delayed by COVID-19.
usage from commercial to residential during the pandemic.
Real Estate and Construction
Activity in the residential real estate market expanded at
a brisk pace. Demand for both single and multifamily
housing was strong across the District. Lack of affordable single-family housing is further increasing the demand for multifamily houses, with several contacts observing growth in new construction to meet current demand. Additionally, a few contacts noted increases in
building permit activity and construction loan requests for
single-family and multifamily projects. Reports from
Alaska point at continuing delays in construction due to
uncertainty about the availability and cost of labor and
materials. House prices continued to increase across the
region. Several Southern California contacts reported
noticeably strong price surges in recent weeks, including
rents. However, a report from Arizona suggested that
prices have stabilized somewhat in the region, yet at a
higher level.
Manufacturing
Activity levels in the manufacturing sector rose slightly.
Operational disruptions due to the pandemic have eased
somewhat, normalizing manufacturing activity and capacity utilization. Nonetheless, supply-chain bottlenecks
and labor shortages continued to hold back many manufacturing processes. Manufacturers expecting disruptions to persist mentioned plans to stockpile raw materials and find suppliers closer to their production sites.
High demand for renewable energy continued, although
with some delays in orders as customers await more
clarity on new federal policies.
Commercial real estate activity was largely subdued.
The spread of the Delta variant as well as labor shortages hindered the recovery of office, retail, and hotel sectors. Consequently, rents and leases in commercial real
estate were noted to have fallen, and vacancy rates
increased largely in California. Conversely, conditions in
the industrial real estate sector strengthened, partially
due to increased demand from manufacturers.
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource sectors
strengthened somewhat. Demand for the regions’ agricultural products continued to be robust both domestically and internationally. Crop yields on tree fruit, wheat,
and grapes were lower due to warmer temperatures and
water shortages. A few contacts reported farmers leaving a portion of their acreage fallow to use water on more
profitable crops. As a result, some fruit inventories were
reduced. Several contacts noted price pressures coming
from increased transportation and labor costs. Some
producers in the Pacific Northwest highlighted that labor
shortages led them to hire most of their seasonal workers through the temporary workers visa program as
opposed to locally. Supply chain disruptions and shipping delays continued to weigh on producers with one
contact reporting about 25 percent of orders being unshipped. The overall sales volume for the energy sector
remained at normal levels, despite the shift in customer
Financial Institutions
Lending activity picked up further over the reported
period. Consumer demand for loans remained strong,
with most origination stemming from residential loans
and credit card lending. At the same time, auto lending
was muted due to inventory restrictions. Bankers across
the District highlighted that loan competition was reportedly at record highs, as liquidity levels remained elevated and interest margins were further squeezed. Business investments were largely muted due to uncertainty
faced by business owners. ■
L-2
Cite this document
Federal Reserve (2021, November 2). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20211103
@misc{wtfs_beige_book_20211103,
author = {Federal Reserve},
title = {Beige Book},
year = {2021},
month = {Nov},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20211103},
note = {Retrieved via When the Fed Speaks corpus}
}