Beige Book
For use at 2:00 PM EST
Wednesday
January 12, 2022
Federal Reserve Districts
2022
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Overall Economic Activity
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Employment and Wages
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Prices
Highlights by Federal Reserve District
New York
Boston
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Philadelphia
St. Louis
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Minneapolis
Cleveland
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Richmond
Kansas City
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Atlanta
Dallas
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Chicago
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San Francisco
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Federal Reserve Bank of
Boston
The Beige Book ■ January 2022
Summary of Economic Activity
Business activity in the First District was steady or up slightly on balance. Employment increased modestly and wages
advanced at a strong pace. Input pricing pressures stayed high or intensified, and firms’ output prices increased moderately. Retailers had mixed recent results but performed well above pre-pandemic levels, while tourism contacts reported
modest improvements in activity. Manufacturing results varied from robust revenue growth to large declines in sales.
Software and IT services firms enjoyed strong, roughly stable demand. Single-family home sales picked up slightly but
remained off of their year-earlier levels, and condominium sales gained further momentum as a lower-priced option.
Commercial real estate activity was steady. The outlook was mostly positive, but uncertainty remained high and the
Omicron variant of Covid-19 presented a risk to near-term activity in some sectors
at very high levels. Manufacturing contacts reported
intense input pricing pressures, with increases as high
as 30 percent over the year. Large input price gains
pertained to a wide range of commodities, including
foam, steel, aluminum, wood, cornstarch, adhesives, and
cardboard. Some manufacturers raised their final goods
prices by large margins (over-the-year) to compensate
for the higher costs but at least one said it was trying not
to raise prices.
Employment and Wages
Employment was up modestly on average and wages
increased at a strong pace. Headcounts were unchanged among retail and tourism industry contacts, and
mixed but flat on balance at software and IT services
firms. Among manufacturers, employment was either flat
or up by moderate or even robust margins. Three contacts from diverse sectors said that it had recently become easier to hire workers, while others reported that
hiring remained difficult but had not deteriorated. Elevated turnover remained a problem for several firms, but
one noted that vaccine mandates had not resulted in
increased quits. Wages posted strong gains on average,
with year-over-year raises ranging from only slight to a
robust 10 percent. The outlook for hiring in 2022 was
quite varied, as a few firms described moderate-toaggressive hiring plans while at least one intended to
shed workers.
Retail and Tourism
Retail and tourism contacts offered mostly positive reports. A clothing retailer enjoyed a robust seasonal surge
in sales above its already-strong performance in the first
3 quarters of the year, as recent sales exceeded comparable 2020 levels by low double-digit percentages. A
furniture seller saw revenue above pre-pandemic levels,
but its sales volume dropped in recent months relative to
the record-setting levels posted in the summer of 2021.
Airline passenger traffic through Boston picked up steadily in recent months, and passenger levels in a recent
-week period were 200 percent higher than in the same
period in 2020. (All statements about air travel and tourism were relayed prior to the recent, Covid-related surge
in flight cancellations in the US and elsewhere). Passenger levels nonetheless were off by about 25 percent
compared with 2019. Retail passengers in January 2022
are expected to show further improvement, but the recovery of international and business travel continues to
Prices
Prices increased moderately on average among the
contacts reached this round. Prices were stable on balance at software and IT services firms. Average hotel
room rates in the Boston area edged up moderately in
recent months and increased sharply on a year-overyear basis. Retailers raised their prices somewhat in
recent months in response to rising input costs and
robust demand, although one experienced some consumer pushback after its latest price move. Retail contacts said that freight and shipping costs had stabilized
A-1
Federal Reserve Bank of Boston
trail that of domestic leisure travel. Hotel occupancy
rates in the greater Boston area also saw further modest
gains in recent months, and November’s average occupancy rate of 58 percent represented a marked improvement from one year earlier. Retail and tourism contacts
expressed a largely optimistic outlook for demand in
2022.
bility, spurring moderate increases in new construction
and office-to-lab conversions. The industrial property
market also continued to thrive, and despite low inventories construction was limited to the activity of a few large
users. Retail leasing was still weak, especially for smaller stores relying on urban foot traffic, although sales at
restaurants and experiential retail got a modest seasonal
boost and high-end malls showed relative strength.
Several contacts noted an uptick in conversions of retail
space for warehousing uses. In the office sector, leasing
activity remained scant in most areas but picked up
somewhat in Rhode Island, and vacancy rates and rents
were unchanged. Some contacts noted that “contrarian”
investors increasingly sought to purchase top-quality
office product. Regarding the outlook, contacts were
optimistic on balance but expressed concerns about high
inflation and rising interest rates. Contacts also speculated that premier office properties could see robust leasing
demand in 2022 but that generic offices faced grim prospects, and some perceived that the Omicron variant of
COVID-19 posed at least a transitory risk to activity
moving into 2022.
Manufacturing and Related Services
Reports from First District manufacturers were mixed.
Two contacts, a semiconductor manufacturer and a
supplier of cardboard boxes, continued to record stellar
growth in sales on a year-over-year basis, similar to or
even better than Q3 results. The cardboard box producer
said that its double-digit sales growth would have been
even higher if not for supply constraints. Other firms
were not as positive. A frozen fish producer suffered
large sales declines due to an ongoing supply snafu, a
precision parts maker had flat revenues, and a biotech
firm suffered a sharp drop in demand. Capital expenditures were revised down in Q4 at two firms but stable
otherwise, while spending plans for 2022 were mixed.
The outlook was variable, in line with each firm’s recent
performance, and clouded somewhat by uncertainty
regarding inflation, supply-chain concerns, and idiosyncratic issues. The semiconductor contact expected
strong growth for the next few years but expressed concern that the desire of many countries to make chips
locally could lead to a glut of chips down the line.
Residential Real Estate
Residential real estate activity was stable or up slightly in
November from earlier in the fall. Five New England
states and Boston reported results; Connecticut data
were unavailable. As earlier in the fall, closed sales of
single-family homes were down sharply on a year-overyear basis in most markets (except Boston), reflecting
softer demand compared with historic pandemic highs.
Nonetheless, year-over-year sales improved slightly from
the previous reports and sales were high for the typically
slow month of November. In Boston, single-family sales
rebounded to post slight over-the-year gains. Median
sales prices of single-family homes were roughly flat but
remained higher than year-earlier levels by robust margins. Inventories fell further and are down by large margins from November 2020. The Rhode Island and Massachusetts contacts said that high prices and low inventories in the single-family market pushed many first-time
buyers into the condo market, and in fact condo sales
increased notably in most reporting markets. One contact remarked that “with the threat of climbing interest
rates and rising rents, buyers are focused on securing a
home with a steady mortgage payment to help stabilize
expenses.” ■
Software and Information Technology Services
Software and IT contacts reported stable activity in the
fourth quarter and moderate to strong gains in demand
on a year-over-year basis. For one firm, however, realized revenues were just flat over-the-year despite increased demand, based on normal lags between bookings and payments. Recent results exceeded expectations at two out of the three firms reached this round.
Prices were described as stable, although customer
contracts at one firm included automatic cost-of-living
increases, and two firms said that shifts towards cloudbased services had led to changes in the mix of prices
paid by customers. Changes in profits and margins were
mixed and tended to align with revenue growth. Capital
and technology spending were consistent with prior
plans, but firms had diverse spending trends. Contacts
were generally optimistic for 2022 as a whole, but rising
COVID-19 infection rates and shutdowns in Europe
presented downside risks for the near term.
Commercial Real Estate
The First District’s commercial real estate markets were
stable in recent weeks. Life sciences space in Boston
continued to face very high demand and very low availa-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ January 2022
Summary of Economic Activity
Growth in the Second District economy slowed to a subdued pace, reflecting widespread supply disruptions, labor shortages, and the outbreak of Omicron across the District. However, contacts continued to express fairly widespread optimism about the near-term outlook. Businesses continued to report increases in selling prices, input costs, and wages.
The job market has remained exceptionally tight, with businesses planning to hire more workers, on net, in the months
ahead. Consumer spending was mixed, with vehicle sales weakening further but retail holiday-season sales characterized as solid. The home sales market has been unusually robust for this time of year, and apartment rental markets
strengthened slightly; commercial real estate markets were somewhat stronger. Both residential and commercial construction activity weakened, with contacts noting scattered shortages of materials. Finance-sector contacts reported
ongoing improvement, while regional banks reported stronger loan demand from commercial borrowers but weaker
demand from the household sector.
Employment and Wages
metals, chemicals, construction materials, glass bottles,
and paper. A sizable majority of contacts in most sectors
expect input prices to rise further in the months ahead.
Employment has continued to increase modestly, restrained by ongoing labor shortages. Staffing agencies in
both New York City and upstate New York reported that
hiring orders have remained fairly strong during this
typically slow season, particularly for technology, sales
and human resource workers. However, businesses have
continued to experience difficulty in hiring and retaining
workers. Labor shortages persist across a wide range of
industries and occupations. Businesses in most sectors
plan to add staff in the months ahead.
Hikes in businesses’ selling prices have also remained
widespread, particularly in the manufacturing, distribution, and retail sectors. A major retailer noted that its
selling prices—based on merchandise acquisition costs
negotiated months ago—have not yet risen significantly
but are likely to in the first half of 2022. A majority of
businesses plan to hike selling prices in the months
ahead.
Contacts in all sectors continued to report widespread
wage increases. An upstate New York employment agency noted continued escalation in wages while a New York
City agency reported that there are large gaps between
candidates’ salary requirements and prospective employers’ offers. Minimum wages across New Jersey and
much of New York State were notched up on January
1st. More broadly, looking ahead to 2022, businesses
across all major sectors foresee annual wage increases
averaging around 6 percent.
Consumer Spending
Consumer spending has been steady overall in the latest
reporting period. Non-auto retailers characterized the
holiday season as fairly successful: sales were robust in
November but tapered off a bit in December, which was
attributed largely to the Omicron outbreak. Supply disruptions caused scattered inventory shortages but were
not too disruptive overall. One chain noted that in-store
sales were moderately below 2019 levels but on-line
sales boosted total business above pre-pandemic levels.
New York City continued to lag the rest of the region,
hampered by fewer commuters and visitors. Consumer
confidence among New York State residents climbed to
a 5-month high in early December.
Prices
A large majority of contacts continued to report escalation
in input prices. Contacts noted shortages and exceptionally high costs of a wide range of supplies, including
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Federal Reserve Bank of New York
New vehicle sales continued to weaken and were running well below late-2020 levels, restrained by the ongoing dearth of supply. Many dealers have had little or no
inventory and generally reported a 6-month lag in filling
orders from customers. However, sales of used vehicles
have picked up noticeably, with inventories lean but
shortages far less severe than for new autos.
New York City’s residential rental market was slightly
stronger in recent weeks, as vacancy rates have continued
to edge down, rents have edged up, and concessions have
diminished. Rents on larger apartments, and those in
doorman buildings are now generally above pre-pandemic
levels.
Commercial real estate markets strengthened slightly, on
balance, across the District. In Manhattan, availability rates
were little changed in recent weeks, rents showed signs of
leveling off, and leasing activity has been steady at a fairly
brisk level. Across the rest of the metropolitan region,
office vacancy rates declined modestly, and rents were
steady to slightly higher. In upstate New York, markets
were steady to slightly weaker. The industrial market continued to strengthen, with vacancy rates steady to down
slightly near record lows and rents continuing to escalate.
The retail leasing market, though still soft, has shown signs
of picking up.
Manufacturing and Distribution
Manufacturing activity grew at a slower pace in the final
weeks of 2021, while activity in the wholesale, transportation, and warehousing sectors continued to expand
briskly. Many contacts in these sectors reported further
deterioration in the availability of supplies and escalating
prices, which have impeded business activity. Still, looking ahead to the first half of 2022, these businesses
continued to express fairly widespread optimism.
Services
Service industry activity tapered off somewhat in the final
weeks of 2021. In particular, businesses in the leisure &
hospitality and, to a lesser extent, education & health
sectors noted a drop-off in activity—likely reflecting the
Omicron outbreak. Information industry contacts also
noted a slowdown. However, contacts in professional &
business services noted steady, moderate growth. Businesses in all these industries generally remained optimistic about the near-term outlook.
Construction sector contacts reported a slight uptick in
activity, on balance, though some noted that ongoing
supply shortages and soaring prices have continued to
restrain activity. Both multi-family residential and nonresidential construction starts weakened, though there
continues to be a good deal of ongoing construction in the
pipeline.
Banking and Finance
Contacts in the broad finance sector reported ongoing
improvement in business conditions. Small to mediumsized banks in the District reported little change in overall
loan demand, noting a pickup for commercial mortgages
but weaker demand for consumer loans and residential
mortgages. Refinancing activity declined. Both credit
standards and delinquency rates were reported as unchanged across all loan segments. ■
There are indications that the Omicron outbreak has
dampened both tourism and other service-sector activity
in New York City. Subway ridership, which had been
trending up through November, turned down noticeably
in December and was more than 50 percent below comparable 2019 levels in the second half of the month. New
York City’s New Year’s Eve celebration in Times Square
was scaled back sharply, with crowd capacity limited to
15,000—a small fraction of typical pre-pandemic turnout.
Real Estate and Construction
Sales activity remained relatively strong in the final
weeks of 2021. The volume of co-op and condo sales in
Manhattan remained high, particularly at the upper end
of the market, and inventories have fallen to more normal levels. One industry expert noted that some sellers
are eager to make sales before the end of December
due to uncertainty about tax changes in 2022. Elsewhere
across the District, increasingly lean inventories of unsold homes have restrained sales, pushed up prices,
and led to frequent bidding wars.
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ January 2022
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 not yet returned to pre-pandemic levels. Since the prior Beige Book, the
Omicron variant of COVID-19 has driven up the rate of cases, hospitalizations, and deaths. Contacts noted increased
business disruptions as outbreaks occurred at worksites, in employee households, and among their own families. The
rate of all persons being fully vaccinated edged up to 66 percent. Net employment growth and price increases slowed to
a modest and moderate pace, respectively, while wages continued to rise sharply. However, many firms, especially
larger ones, noted strong profits – “the best year ever” for some. Optimism remained high but waned somewhat, as the
share of firms expressing positive expectations for continued economic growth over the next six months narrowed – to
near two-thirds of the nonmanufacturers and near two-fifths of the manufacturers.
Employment and Wages
Wages continued to rise substantially. The share of
nonmanufacturing firms reporting higher wage and benefit costs per employee held steady at 60 percent. No
firms reported lower compensation.
Employment grew modestly, with growth in the service
sectors more subdued than last period. The share of
firms reporting employment increases fell to one-fifth of
the nonmanufacturing firms and edged up to two-fifths
among the manufacturers. Overall, one-fifth of the nonmanufacturers reported a rise in average hours worked –
a bit less than manufacturers’ one-third share.
Prices
On balance, prices rose moderately over the period –
less than the prior period’s sharp increase. The share of
manufacturers reporting higher prices for factor inputs
decreased to 68 percent, while those receiving higher
prices for their own products fell to 51 percent. The
share of nonmanufacturers reporting higher prices for
their inputs fell to 55 percent, while the share receiving
higher prices from consumers for their own goods and
services dropped to 34 percent.
Staffing firms and most employers continued to report
significant difficulty attracting and retaining labor. The
surge in Omicron cases created staffing challenges in
some sectors more than in others.
Employment in leisure and hospitality remains about 10
percent below pre-pandemic levels – more so in the city
of Philadelphia – accounting for 175,000 jobs in our
three states. While contacts noted great difficulty finding
workers, they expect that fewer staff will be required as
new technology and lower levels of service (e.g., less
frequent fresh towels) are deployed. Likewise, auto
dealers are employing about 5 percent (8,000) fewer
workers than they did pre-pandemic in New Jersey and
Pennsylvania. While dealers noted a need for mechanics, their demand for salespeople is limited while inventories remain scarce and may not fully recover if customers accept and adapt to new sales technologies.
Contacts noted that rising wages and higher commodity
costs were driving the price increases. Many contacts
noted that supply chain disruptions had worsened. Builders also noted the impact from the higher tariff on Canadian lumber.
About 62 percent of the manufacturing contacts reported
they expect to pay higher prices over the next six
months, and slightly less than that expected to receive
higher prices for their own goods.
C-1
Federal Reserve Bank of Philadelphia
Manufacturing
that lenders were becoming increasingly creative at
qualifying buyers for new loans. One contact was concerned that a bubble was forming in home mortgages;
however, most contacts still felt that home values were
sufficient to allow the majority of homeowners to sell
their properties and pay off mortgages that had become
unaffordable.
On average, manufacturing activity grew modestly – a
drop-off from the prior robust pace. The share of firms
reporting increases in shipments and new orders fell to
levels matching their long-run nonrecession averages.
Moreover, increases in net backlogs and delivery times
were less widespread, and net inventories held steady.
Bankers and accountants noted an increasing level of
uncertainty on the part of their business clients. Some
are choosing to sell their businesses, while buyers find it
cheaper to acquire a new business than to grow one –
fueling the ongoing high level of mergers and acquisitions. Prior to the surge in Omicron cases, one accounting firm noted a growing fear among its clients of another
wave of COVID – that many think the resulting decreased demand would cause them to close their businesses.
Consumer Spending
Retailers (nonauto) and restaurateurs continued to report
modest growth. Contacts noted that the rise in COVID19 cases had begun to disrupt worker attendance and
may have dampened late holiday season activity.
Supply constraints further reduced inventories for auto
dealers – causing new auto sales to fall modestly from
already low levels. Contacts expect the limited inventory
to preclude the typical year-end sales surge that accompanies year-end bonuses. However, continued demand
maintained upward pressure on new and used car prices, and some contacts noted that the high prices were
causing some potential buyers to exit the market.
Real Estate and Construction
Homebuilders reported no change to relatively high
levels of contract signings and construction activity.
Contacts did note higher construction costs for materials
and labor, increased delays because of supply chain
problems, and other negative impacts on sales and
production as Omicron variant cases surged.
Overall, tourism continued to improve at a modest pace
of growth; however, as COVID-19 cases surged in late
December because of the Omicron variant, staffing
challenges increased and some bookings were canceled, especially within the business travel segment.
Resort areas continued to report strong demand but
noted that customers had become more demanding –
were rougher on resort properties and were refusing to
wear masks.
Existing home sales appeared to hold steady at high
levels. Excess demand continued to reward cash buyers
with offers above the asking price. Contacts noted that
rental units were becoming unavailable, and in some
markets, inquiries have increased about mobile home
regulations, while some hotels are offering long-term
rentals for people stuck between homes.
Nonfinancial Services
On balance, nonmanufacturing activity continued to grow
moderately, although the share of firms reporting increases in sales retreated to half from nearly two-thirds.
The share reporting increases in new orders remained at
about one-third.
Construction activity and leasing activity for most segments of nonresidential real estate held steady. Contacts
noted that demand for new industrial/warehouse space,
institutional projects, and multifamily housing remained
strong, while rents continued to rise for existing properties. Uncertainty continued in the office market as analysts debate the extent to which demand will fall. Once
again, the recent surge in cases from the latest COVID19 variant has delayed return-to-office plans and clouded
forecasts. ■
Financial Services
The volume of bank lending (excluding credit cards)
edged higher during the period (not seasonally adjusted); loan volume growth was similar during the same
period in 2019. Loan volumes rose modestly in commercial real estate, moderately for home mortgages, and
robustly for commercial and industrial lending. However,
home equity lines and other consumer loans fell modestly, while auto lending fell sharply. Growth in credit card
volume was very strong – a bit stronger than during the
same period in 2019.
Bankers, accountants, and bankruptcy attorneys have
noted relatively few changes in delinquencies or defaults. However, financial and real estate contacts noted
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ January 2022
Summary of Economic Activity
On balance, the Fourth District economy expanded at a moderate pace in recent weeks, although growth varied by
segment. Demand generally remained solid, but the emergence and spread of the Omicron variant of COVID-19 reportedly constrained sales in some high-contact service-providing industries, especially food services and leisure and hospitality. Moreover, persistent supply chain challenges continued to limit growth for manufacturing firms, construction companies, and some retailers. Despite these supply constraints, general merchandisers and apparel retailers suggested
that holiday sales were solid. Looking forward, contacts generally expected demand to continue to grow in coming
months, but at a somewhat slower pace than currently as renewed uncertainty about the path of the pandemic tempered
their optimism. Supply challenges were expected to persist in coming months, keeping upward pressure on costs and
prices. However, most contacts expected meaningful relief from disruptions in 2022, especially in the second half of the
year.
Employment and Wages
slower pace than in our last report. The share of contacts
reporting higher costs declined from around 85 percent
to roughly 75 percent. While cost pressures reportedly
intensified for firms in the transportation sector, contacts
noted some relief in manufacturing and construction.
Firms in the latter two industries suggested that costs
remained high, but prices for inputs such as steel, aluminum, and resins had stabilized and in some cases had
come down. Looking forward, firms expected input cost
pressures to continue easing in coming months as supply chain disruptions dissipated, although they anticipated that costs will remain elevated.
With labor demand outpacing labor supply, wages continued to rise. Nearly 70 percent of business contacts
indicated that they had increased pay rates during the
prior two months, a share that was virtually unchanged
since our last report. While wages are rising most notably among hourly workers, salaried workers are seeing
meaningful increases, as well, according to our contacts.
Anticipating little relief from labor shortages in the near
term, firms expected competition for workers to remain
intense, keeping upward pressure on labor costs.
Pressure on selling prices remained elevated. Roughly
two-thirds of contacts suggested they had increased
selling prices over the prior two months, similar to in the
prior report. Firms continue to indicate that they raised
prices to offset higher nonlabor input costs and protect
margins. Also, contacts more frequently reported that
they were factoring in the cost of higher wages in pricing
strategies as well.
Labor demand remained solid in the District in recent
months and hiring picked up. Staffing services contacts
indicated that firms across a wide array of industries
were hiring to keep up with strong demand. Several
contacts noted a continued trend toward higher turnover
amid a persistently competitive job market. Moreover,
several contacts suggested that increased retirements
led to more openings. Looking forward, businesses
expected to continue boosting staffing levels in coming
months, although they anticipated that labor availability
would remain constrained.
Consumer Spending
Consumer spending increased modestly. General merchandisers and apparel retailers said that demand for
goods remained strong, and many noted favorable holi-
Prices
Nonlabor input costs continued to rise, albeit at a slightly
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Federal Reserve Bank of Cleveland
day sales. Restaurateurs and hoteliers reported a pickup
in sales in recent weeks, although some restaurateurs
said that news of the omicron variant dampened activity.
Auto dealers reported limited sales despite generally
elevated demand as tight inventories and higher prices
deterred buyers. Contacts expected nonauto consumer
spending to remain relatively strong in the coming
months, and multiple auto dealers were optimistic that
sales would increase along with inventory levels in the
first quarter of 2022.
Financial Services
Loan demand increased moderately. Contacts reported
growth in business lending despite elevated cash balances, and many bankers reported a stronger loan pipeline. Lenders said that demand for auto loans and mortgages was slightly down because limited inventories and
higher selling prices in both markets dampened activity.
Lenders said that delinquency rates for consumer and
commercial loans were still low and that core deposits
had increased in recent months. Looking ahead, bankers
expected that business loan volumes will continue to
increase because of a large number of applications in
the pipeline.
Manufacturing
Growth in demand for manufactured goods slowed
somewhat in recent weeks, although it remained solid.
Some contacts attributed softer growth to persistent
supply chain disruptions and long lead times, both of
which limited availability of essential inputs. For example, one steel manufacturer said that a customer reduced its purchases until diesel engines and truck chassis were more readily available. Many manufacturers
also noted that the shortage of production workers inhibited their ability to keep up with demand or build inventories to desired levels. Looking forward, many manufacturers expected that supply constraints will continue to
limit production through the next several months.
Professional and Business Services
Professional and business services firms continued to
experience robust activity. Demand for HR and IT software and solutions remained strong, while the recently
passed infrastructure bill increased demand for engineering firms. Accounting and wealth management firms
also reported increases in activity, in part because of
potential changes in federal tax laws. IT firms anticipated
that demand will remain strong as businesses continue
to shift to more online work. Other professional and
business services firms were also optimistic about the
future and anticipated that an increasing number of
public agencies will be seeking project proposals related
to the infrastructure bill.
Real Estate and Construction
Housing demand has remained elevated. But one homebuilder noted that he no longer had time to build spec
homes to take advantage of strong demand because of
the number of projects already under contract. Supply
chain disruptions also slowed current construction activity. A homebuilder indicated that he had been unable to
complete homes that were already sold because of labor
and materials shortages. Going forward, contacts expected demand to remain strong as consumers look to
lock in low interest rates, although supply chain disruptions were expected to continue impeding new home
construction.
Freight
Demand for freight services increased moderately in
recent weeks from an already high level. As in other
industries, capacity constraints and supply disruptions
were limiting growth. When asked if his firm had seen
increased activity in recent months, one contact said his
firm was “running at capacity, (so) no change is the only
possible response at this point.” Moreover, a logistics
firm noted that problems getting containers in from overseas contributed to lower-than-expected volumes just
prior to the Black Friday–Cyber Monday period. While
the scarcity of drivers and trucks is likely to persist well
into 2022, multiple contacts expected supply chain disruptions to ease late in the year and improve at least
truck availability. ■
Demand for nonresidential construction and real estate
remained stable on net but continued to vary by sector.
Leasing activity for industrial space remained robust,
while office occupancy rates continued to decrease.
Contacts reported that nonresidential construction activity has remained solid overall, with the strongest demand
centered on industrial spaces. Going forward, contacts
were less optimistic about future construction demand
because concerns about supply chain disruptions, labor
availability, and inflation have led some firms to delay
construction projects.
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 ■ January 2022
Summary of Economic Activity
The Fifth District economy grew modestly but was somewhat constrained by supply issues and labor shortages. Manufacturers reported a moderate increase in shipments, new orders, and backlogs while inventory levels remained low as
supply shortages persisted. Ports continued to see record-breaking volumes, particularly for imports. Trucking companies experienced strong demand and did not see the typical seasonal slowdown. Retailers reported strong demand,
increased foot traffic, and sales levels on par with 2019. Travel and tourism remained strong, driven by leisure travel as
hotel occupancy rose, although hotels had to limit the number of rooms or services due to staffing shortages. Demand
for residential real estate remained strong but declined slightly in recent weeks. Home prices were little changed and
inventories remained low. Commercial real estate activity increased moderately. Banks reported a slight decline in loan
demand as a result of the softening in mortgage activity and concerns from businesses over the rise in Covid cases.
However, commercial and business lending held steady. Nonfinancial services generally experienced flat to modestly
increasing revenues in recent weeks. Employment rose moderately and demand for workers remained strong, but companies continued to report challenges filling open positions. Some employers were concerned that rise in Omicron cases would add to their labor challenges. Wages rose strongly as many employers gave larger than usual year-end increases. Prices grew robustly as firms increases prices in response to higher costs of goods and labor.
with some of the largest cost increases coming from
freight and energy.
Employment and Wages
Employment in the Fifth District increased moderately
since our previous report. Demand for workers remained
robust with many firms reporting unfilled job openings
and difficulties finding qualified candidates. Several
contacts noted that their employees were getting unsolicited job offers from other companies. The tight supply of
labor led some companies to look to investment in technology and automation so they could operate with a
smaller headcount. A few employers expressed concerns
that the Omicron variant of Covid-19 would add to labor
challenges as more employees may be required to quarantine. Wages increased strongly with many contacts
reporting higher than usual year-end wage increases.
Several noted that those increases were in addition to off
-cycle wage increases already made this year to attract
and retain workers.
Manufacturing
Fifth District manufacturers experienced a moderate
increase in shipments and new orders since our previous
report. Capacity utilization increased, but the higher
volume of new orders led to increased backlogs. Low
levels of inventories of raw materials and finished goods
persisted. Lead times continued to lengthen for many
components, including microchips, but a few producers
saw lead times ease slightly for some materials. Several
manufacturers anticipated supply chain disruptions to
extend at least into the second half of 2022. Spending on
equipment and software picked up modestly in recent
weeks.
Ports and Transportation
Fifth District ports reported strong growth and recordbreaking volumes since our last report. Import volumes
drove growth, with export volumes down slightly with the
exception of farm equipment. Several respondents reported receiving diversion from other east coast ports
due to congestion or carriers skipping ports due to time
and cost concerns. Shipping prices remained high but
have come down from their peak earlier in the year. Most
ports stated they are running at or over capacity, with no
Prices
Price growth increased further in recent weeks from an
already elevated rate. According to our surveys, average
prices received by services firms was up by more than
six percent compared to last year. Firms reported even
stronger growth in non-labor input prices. Additionally,
many firms reported raising wages and passing the
higher labor costs through to final prices. Manufacturers
also reported strong growth in prices paid and received,
E-1
Federal Reserve Bank of Richmond
additions to U.S. container capacity expected until at
least 2023. Shortage of transportation equipment and
warehouse space caused imports to sit at rail yards and
ports for longer periods. All the ports indicated that cost
for both labor and equipment were rising rapidly. One
airport noted that both passenger and air freight traffic
were up this holiday season.
with low vacancy rates and rising sale prices and rental
rates. Office leasing improved slightly, but tenants were
still doing short term lease renewals amid some indecision by companies as to future space requirements. The
owner-occupied real estate market was strong as more
businesses have decided to own their space. Retail
leasing was good with lots of renewals and new tenants.
Multifamily leasing remained robust with rising rents.
Contacts also reported increased multifamily construction in their markets.
Trucking firms in the Fifth District cited unusually strong
demand for shipping for this time of year. Volumes were
high across most goods in both the industrial and retail
sectors. Contacts reported turning away business because of shortages of drivers and equipment. Trucking
firms indicated that employment and equipment costs
have continued to increase and they have been able to
pass them along customers.
Banking and Finance
Overall loan demand slowed slightly, mainly due to usual
seasonality as well as new Covid concerns from the
Omicron variant. However, commercial real estate and
business lending remained steady. Mortgage lending
was down slightly and one respondent noted that the
supply of homes was keeping the loan volume depressed. Direct auto lending was still being impacted
from a lack of car dealer inventory. Financial institutions
noted that deposit levels were still increasing modestly,
even in a low-rate environment. Credit quality continued
to be excellent with one bank noting their delinquency
rates were at 15-year lows.
Retail, Travel, and Tourism
Retail demand in the Fifth District was strong since our
last report. Customer traffic increased and retailers were
on track to meet 2019 sales levels. Retailers passed on
the higher costs of goods, mainly owing to elevated
freight costs, as well as higher labor costs. Auto dealers
saw strong revenue because of high prices of used
vehicles and increased demand for servicing of existing
cars, but new car sales were down because of low
inventory levels.
Nonfinancial Services
Nonfinancial services firms reported a modest increase
in revenues and demand. Professional services firms
experienced strong demand and steady to increasing
revenues. Health services firms, however, reported flat
to slightly declining revenues. One health care provider
said that staffing shortages inhibited their ability to meet
demand and led to falling revenues. Educational institutions reported no changes to demand or revenues in
recent weeks. ■
Fifth District travel and tourism held strong primarily due
to leisure travel. Contacts noted that there has been a
limited amount of group or business travel, as well as
fewer conferences or conventions. Passenger counts at
airports are at their highest since the beginning of the
pandemic. Hotel occupancy and room rates strengthened, but hotels are holding back rooms or limiting
service because of staff shortages. Restaurants saw
strong demand but had to limit hours or days of service
because of lack of staffing, and reducing menu choices
because of supply chain disruptions.
Real Estate and Construction
Demand for Fifth District homes has experienced some
seasonal slowing since our last report but remained
strong. Average days on the market increased slightly,
but remains short amid low inventory levels. Home
prices remained elevated, discouraging some purchasers, but buyers did not have any difficulty qualifying or
obtaining mortgages. Rising construction costs, long
lead times for materials and equipment and shortages of
skilled trade labor continued to slow residential construction and limited the availability of new homes.
Overall, activity in the commercial real estate market
continued to increase at a moderate rate in the Fifth
District. The industrial segment remained very strong
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ January 2022
Summary of Economic Activity
Economic activity in the Sixth District expanded moderately from mid-November through December, even amidst widespread outbreaks of the Omicron variant late in the reporting period. Demand for workers remained strong and labor
market tightness persisted. Upward pressure on wages was widespread. Nonlabor costs grew, albeit at a slower pace.
Retail sales were solid; auto sales, however, remained challenged due to supply chain constraints. Domestic leisure
travel was strong. Business travel and convention bookings picked up somewhat, though increases in Omicron cases
precipitated some postponements and cancellations in the near term. Robust housing demand continued. Conditions in
commercial real estate improved. Manufacturing activity was healthy. Conditions at financial institutions were steady,
though deposit levels declined, and loan demand slowed somewhat.
Prices
Employment and Wages
Several contacts noted that many nonlabor costs leveled
off or increased only slightly since the previous report,
though the rising cost of steel and freight was frequently
mentioned. Most contacts expect price levels to remain
elevated for the foreseeable future, and while pricing
pressures from supply chain issues and labor shortages
are expected to ease over the next year, they are not
expected to disappear. Pricing power softened somewhat as contacts expressed worry that continued price
increases would drive demand downward. The Atlanta
Fed’s Business Inflation Expectations survey showed
year-over-year unit costs were unchanged in December
at 3.6 percent. Year-ahead expectations increased slightly to 3.4 percent in December, up from 3.3 percent in
November.
Demand for labor was strong over the reporting period
amidst pervasively tight labor supply. Most employers
reported that qualified candidates for open positions
remained in short supply across all jobs but particularly
for entry-level positions. Shortages of workers were
reported to be exacerbated by childcare availability
issues and remaining Federal subsidies, such as the
advance on child tax credits. Additionally, geographic
competition for workers has expanded with increased
remote-work options. Tight labor conditions have firms
intensely focused on retention. Some reported being
proactive with wage increases while others added “stay”
bonuses that reward a longer-term commitment of two
years. Firms continued to evaluate greater flexibility for
workers and even more time off, including additional “self
-care days,” remote work, and four-day workweeks.
Many continued to advocate for COVID vaccines, but not
mandate them, with the ultimate aim to retain employees. Several employers said they are making plans to
reduce their labor dependence through technology and
automation. It was noted that some smaller firms were
making a concerted effort to stay under the 100employee threshold that would exempt them from costly
COVID vaccine and testing regulatory requirements. In
late December, some employers noted an uptick in
absenteeism related to Omicron which resulted in curtailed operations.
Upward pressure on wages remained relatively widespread. Increases were most notable at the lower end of
the pay scale and among new hires. Most contacts
indicated they feel like they are chasing market wages to
attract and retain staff. Wage growth remains above plan
for most firms, and many anticipate higher wage growth
in 2022.
Consumer Spending and Tourism
Consumer spending remained healthy throughout the
holiday season, particularly for off-price retailers. District
contacts noted an increase in foot traffic compared with
year-earlier levels. Auto sales remained low , and dealers expect continued supply constraints, heightened
demand, and improved earnings into 2022.
Travel and hospitality contacts reported robust domestic
leisure travel driven by festivals and holiday events.
District cruise activity was strong, though passenger
counts were lower than pre-COVID levels as cruise lines
maintained self-imposed capacity limits. While there was
an uptick in business travel and conventions early in the
reporting period, bookings remained well below 2019
levels and contacts noted increased postponements and
cancellations due to the rise in Omicron cases.
F-1
Federal Reserve Bank of Atlanta
downward amid renewed uncertainties about the course
of the pandemic and growing underwriting competition
from nonbank lenders. Deposit levels declined slightly
but remained elevated. Financial institutions continued to
hold higher balances in both cash accounts and securities portfolios. Asset quality remained healthy without
any notable increases in nonperforming loans or chargeoffs. Increased earnings have been driven by lower loan
loss provision expenses and reductions in noninterest
expenses, though margin pressures persisted due to the
low interest rate environment.
Construction and Real Estate
Housing demand in the District remained strong over the
reporting period. Though slightly higher interest rates
have slowed refinance mortgage activity, demand for
home equity lines of credit and other mortgage products
was steady. Many markets throughout the District continued to attract buyers from higher-cost markets such as
the Northeast and West Coast. Demand from investors
and second-home buyers continued to emerge as a
significant component of the housing market. Home price
appreciation continued to rise sharply, leading to escalated concerns about housing affordability over the long
term. Despite significant increases in new home starts
over the past year, builders continued to struggle to keep
pace with demand given the widespread challenges
created by supply chain disruptions. After abating earlier
this year, rising material costs, particularly for lumber,
have become more burdensome for builders.
Energy
Activity across energy sectors held steady or grew slightly over the reporting period. Chemical manufacturing and
petroleum refining picked up across the region; however,
contacts continued to report supply chain bottlenecks for
various inputs, constraining some chemical production.
Utilities industry contacts noted sustained growth in
commercial, residential, and industrial business lines.
Contacts also continued to report significant investments
in renewable energy development and production, primarily in solar, wind, and carbon capture technologies.
Commercial real estate (CRE) activity improved, on
balance, since the previous report. Contacts noted improving conditions in the office sector as more businesses reopened. After a very robust year, activity in the
multifamily sector slowed due to seasonality; occupancies, however, remained at healthy levels. Contacts
continued to 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, at this juncture.
Agriculture
Agricultural conditions remained mixed. Parts of the
District experienced unusually dry conditions. The December production forecast for Florida’s orange crop
was down from last year’s production while the grapefruit forecast was unchanged from last year’s production.
The USDA reported year-over-year prices paid to farmers in November were up for corn, cotton, rice, soybeans, cattle, broilers, and eggs but down for milk. On a
month-over-month basis, prices were up for corn, cotton,
rice, soybeans, cattle, broilers, and milk, but down for
eggs. ■
Manufacturing
Reports on manufacturing activity were largely consistent with the previous report. Contacts noted robust
demand and increased revenues, though some firms
indicated that production was hindered somewhat by
supply chain disruptions and high employee turnover.
District manufacturers expect further strengthening in
demand in 2022, but concerns over supply chain interruptions, labor shortages, and rising input costs remain.
Transportation
Transportation activity remained robust over the reporting period. District ports experienced further growth in
container traffic, and some reported utilizing “pop-up”
container storage yards to clear congestion on port
properties. Railroads noted significant increases in intermodal freight and overall traffic year-to-date. However,
terminal dwell times lengthened, and rail contacts cited a
deterioration in service delivery amid crew shortages and
a dearth of conductors. Air cargo contacts noted increased demand as ecommerce shipments surged.
Banking and Finance
Conditions at Sixth District financial institutions remained
steady over the reporting period. Loan growth trended
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 ■ January 2022
Summary of Economic Activity
Economic activity in the Seventh District increased modestly in late November and December, and contacts expected a
similar pace of growth over the coming months. Labor and materials supply constraints as well as the spread of COVID19 continued to weigh on the expansion. Employment, consumer spending, and business spending grew modestly;
manufacturing was up slightly; and construction and real estate was flat. Wages and prices rose rapidly, while financial
conditions were little changed. Agricultural incomes were strong for 2021.
were large increases in producer prices, driven by passthrough of higher costs for materials, labor, and transportation. However, contacts noted that some input prices,
particularly for energy and certain steel products, had
stabilized after very large increases earlier in the year.
Consumer prices generally moved up robustly, with
contacts pointing to solid demand, limited inventories,
increased costs, and a greater ability to pass cost increases on to customers as sources of the higher prices.
Employment and Wages
Employment increased at a modest pace over the reporting period, and contacts expected growth to pick up over
the next 12 months. Contacts across sectors reported
persistent difficulty in finding workers at all skill levels. In
addition, contacts noted some new hires did not show up
on their expected first day or quit soon after. Many businesses continued to limit operating hours because of
labor challenges, especially in the restaurant, retail, and
manufacturing sectors. Rising COVID-19 cases led
some companies to further delay plans to return to inperson work, and there were reports of business closures after COVID-19 exposures forced a large number
of workers to quarantine. Some contacts expressed
concern about the potential of vaccination requirements
to limit labor supply. Overall, wage and benefit costs
increased robustly. A scarcity of applicants for open
positions led numerous contacts to raise wage offers, yet
not all were successful in filling open positions. To retain
workers, many employers increased the frequency of
pay raises. Furthermore, contacts said they were giving
larger-than-usual raises and year-end bonuses to account for inflation or share healthy profits with workers.
Consumer Spending
Consumer spending increased modestly from a high
level over the reporting period. Holiday spending met or
slightly exceeded forecasts. Nonauto retail sales increased moderately, with contacts noting greater spending on groceries and pet supplies, as well lumber and
building materials. Sales remained elevated in the apparel, furniture, and appliance categories. Thrift and discount stores also reported strong sales. Consumer electronics were a clear “laggard” according to one contact,
decreasing modestly amid tight inventories. Light vehicle
sales were little changed. Although vehicle inventories
were modestly up, low levels continued to limit volumes.
Dealer profit margins remained strong, reflecting both
high vehicle prices and increased service department
activity. Leisure and hospitality activity was flat overall,
though restaurant spending increased modestly.
Prices
Overall, prices rose rapidly in late November and December, and contacts expected price increases to continue at a strong pace over the next 12 months. There
G-1
Federal Reserve Bank of Chicago
Business Spending
ticked up. Demand for building materials was flat at a
high level, supported by solid orders for commercial and
residential construction.
Business spending increased modestly in late November
and December. Retail inventories remained at low levels
in numerous sectors due to domestic and international
supply chain challenges, and contacts expected the
issues to persist into the second half of 2022. Manufacturing inventories changed little and were still tight, with
shortages of a wide range of inputs, most notably certain
metals, chemicals, and electrical components. Demand
for transportation services remained high, even as many
contacts reported continued domestic and international
shipping delays and elevated cargo and freight rates.
Capital expenditures increased moderately, with contacts highlighting technological upgrades (such as new
automation equipment) and facility expansions. Contacts
expected a similar increase in capital expenditures over
the next twelve months. Residential and commercial
energy consumption increased slightly, notably in leisure
and hospitality, while industrial consumption decreased
slightly.
Banking and Finance
Financial conditions were unchanged on balance over
the reporting period. Business loan demand increased
slightly, notably for commercial real estate, equipment,
and commercial lending. One contact also reported
increases in business loan refinancing. Business loan
quality decreased slightly, while standards loosened
slightly. In consumer markets, loan demand was unchanged on balance, as were loan quality and standards.
Agriculture
High prices and bumper corn and soybean harvests led
to strong agricultural income in 2021. Agricultural lenders
reported few issues with credit quality. Expectations are
for income to be lower in 2022 than in 2021, as recent
growth in input prices outpaced growth in agricultural
goods prices and farmers expected the trend to continue. More crop farmers than typical applied fertilizer on
fields during the fall because of expected cost increases
and questions about future availability. Contacts also
voiced concerns about pricing and availability of other
inputs, with a jump in forward contracting to ensure
supplies for 2022. Prices for corn and soybeans rose
during the reporting period, supported by weather problems in South America and a pickup in ethanol production. Prices for cattle, hogs, eggs, and dairy products
moved higher. Farmland prices stayed on a rapid upward trend. ■
Construction and Real Estate
Construction and real estate activity was little changed
relative to the previous reporting period, though contacts
said there were more projects in the pipeline. Residential
construction was flat, while residential real estate activity
decreased slightly. One real estate contact indicated that
uncertainty surrounding the economy and the pandemic
contributed to the slowdown. Home prices and rents
increased modestly. Nonresidential construction was
steady over the reporting period. Contacts indicated that
long lead times and labor shortages persisted. Commercial real estate increased slightly, with activity in the
industrial and multi-family sectors continuing to outpace
that of the retail and office sectors. Sales and prices
were up slightly for commercial properties. Commercial
rents and vacancy rates were unchanged, though the
availability of sublease space edged up.
Manufacturing
Manufacturing production increased slightly in late November and December, with many contacts reporting
growth in order backlogs. Despite strong demand for the
majority of manufacturers, ongoing capacity constraints
due to challenges securing inputs, particularly labor,
limited production gains. Auto output rose only slightly,
as assemblers and suppliers continued to face shortages
of microchips and other materials. Demand for heavy
trucks picked up on top of an already strong level, but
production of new trucks held steady, leading to higher
prices for used trucks. Contacts reported little change in
overall steel demand, which stayed strong. There was a
small increase in steel availability as capacity utilization
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ January 2022
Summary of Economic Activity
Economic conditions have improved moderately since our previous report. Employers continue to report difficulty hiring
enough workers to meet consumer demand, with some industries with a high degree of direct consumer contact forced
to limit or cut back operating capacity due to staffing shortages. Significant wage pressures persist across most industries. Increases in raw material and transport costs contributed to moderate to strong cost pressures, most of which
firms were able to pass along to consumers. The real estate sector remained strong; supply chain issues continued to
limit construction but activity was higher than typical seasonal levels. The COVID-19 Omicron variant contributed to
labor shortages and sparked some concern about the short-term outlook in the hospitality, transportation, and retail
sectors.
report. Contacts in the hospitality industry reported increasing costs since our previous report and are passing
along most of it to customers. A contact from a jewelry
retail store reported higher input costs and noted plans
to increase prices charged to consumers. Furniture retail
industry contacts reported slightly increased cost pressures and prices charged to consumers. Some contacts
plan to reduce profit margins rather than pass the full
extent of cost increases on to their customers. An auto
retail contact reported no change in costs and prices
since our previous report. A contact reported slightly
lower freight costs since our previous report but also that
freight costs remain higher than before the COVID-19
pandemic. Raw materials prices have increased modestly overall since our previous report.
Employment and Wages
Employment has increased modestly since our previous
report. District contacts reported that widespread attempts to hire have been hampered by widespread
worker shortages. Many firms, unable to find adequate
staff, have been unable to grow or have had to actively
cut back their operations. This was especially true for
high-customer-contact industries, like dining and retail.
St. Louis cut back its public transportation services despite holding job fairs, enticing retired operators back to
work, and—in the words of the supervising CEO—
“literally begging for employees.” Firms across industries
reported increasing flexibility and benefits to entice
scarce workers. Some also used automated processes
as a substitute for workers. Several firms delayed their
return-to-office timelines in the face of the Omicron
variant.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported moderately higher business activity
since our previous report. Consumer sentiment in West
Tennessee regarding current conditions has worsened
since September, but future expectations have improved. General retailers reported higher business activity and a mixed outlook for the next quarter, citing ongoing supply chain and pricing issues. Roughly 39 percent
of consumers in Tennessee reported the majority of their
holiday shopping was online this year, down from 53
Wages continue to grow strongly, particularly for traditionally low-wage positions. One Little Rock restaurant
reported paying its dishwashers $13 per hour and skilled
kitchen staff $16 per hour or more, and an Arkansas
manufacturer reported plans to soon increase its starting
wage by more than 10 percent.
Prices
Prices have increased moderately since our previous
H-1
Federal Reserve Bank of St. Louis
percent of consumers last year. A St. Louis auto dealer
reported that business activity is about the same as
November; however, there is little clarity regarding future
inventory. A restaurant in Arkansas noted that, since
they no longer have restricted occupancy, they are anticipating increased sales; but they noted the increases in
new COVID-19 cases remains a downside risk, especially given tight staffing. Hospitality contacts reported higher business activity month-over-month and year-overyear but a mixed short-term outlook due to the Omicron
variant.
Apartment rental rates were mixed but remain relatively
stable since our previous report, with Little Rock and
Memphis decreasing slightly and Louisville increasing
slightly. All apartment rental rates in the largest District
MSAs remain significantly higher than this time last year.
Residential construction has remained strong since our
previous report but continues to struggle with supply
chain issues and increased costs. A Little Rock contact
reported that, in spite of these problems, optimism remains high and new development continues.
Manufacturing
Manufacturing activity has increased modestly since our
previous report. Firms in both Arkansas and Missouri
reported modest upticks in new orders and production,
although the monthly rate of growth has slowed. Supply
chain issues and labor shortages have increased input
prices and continue to put pressure on firms’ profit margins and service windows. With the passing of the Infrastructure Investment and Jobs Act, firms expect construction, and therefore demand for manufactured inputs,
to increase in 2022. Firms also continue to explore automated substitutes for various aspects of the manufacturing process.
Banking conditions have improved slightly since our
previous report. District banks reported an increase in
overall lending activity since the last period. Business
loans, especially commercial, industrial, and commercial
real estate loans, increased slightly while consumer and
residential real estate loans increased moderately. Deposit levels remained high but growth moderated. A
contact in Little Rock noted that the rate of forgiveness
for PPP loans has risen through the previous quarter and
predicted that the balance will be near zero by the middle of 2022. The outlook for 2022 among bankers is
cautiously optimistic, as they expect loan growth across
all divisions.
Nonfinancial Services
Agriculture and Natural Resources
Banking and Finance
Activity in the nonfinancial services sector was unchanged since our previous report. Airport passenger
traffic decreased slightly as rising COVID-19 cases
among workers have resulted in large numbers of flight
cancellations. Airport cargo traffic has increased slightly
since our previous report, although it is down roughly 5
percent relative to this time last year. Memphis and St.
Louis area hospitals are dealing with increases in COVID
-19 patients with the Omicron variant. In addition to the
human toll, the tornado event in the District on December 10 and 11 disrupted transportation through road
closures and damage to infrastructure.
District agriculture conditions remain relatively unchanged since our previous report. The percentage of
winter wheat in the District rated fair or better modestly
increased from the end of October to the beginning of
December, rising from 91 percent to 95 percent. This is a
moderate increase over this period last year. While
contacts in the District are optimistic after a profitable
year due to elevated commodity prices, they are also
concerned about increased costs for fuel, fertilizers, and
other inputs potentially affecting their crop production
next year.
Natural resource extraction conditions improved slightly
from October to November, with seasonally adjusted
coal production increasing just over 1 percent. November production was up significantly compared with a year
ago, increasing nearly 20 percent. ■
Real Estate and Construction
The residential real estate market has remained strong
since our previous report. Home prices are still elevated.
In Memphis, they are up 21 percent since this time last
year. One contact noted that there has not been the
typical drop in demand during the winter months. Inventory remains extremely low across the District, and one
Memphis contact had 14 offers in the first 24 hours a
house was on the market. However, the median number
of days a house remains on the market has increased
slightly since our previous report. While most expect the
strong real estate market to continue into 2022, a contact
expressed concern that any significant hikes in interest
rates will impact demand from buyers.
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ January 2022
Summary of Economic Activity
The Ninth District economy grew moderately since mid-November, though a surge in COVID cases due to the Omicron
variant was delaying return-to-work plans and dampening outlooks in some sectors toward the end of the reporting
period. Employment saw moderate growth, though strong labor demand continued to outstrip supply. Wage pressures
were strong, while price pressures increased moderately from elevated levels. Growth was noted in commercial and
residential construction, commercial real estate, consumer spending, and manufacturing, while residential real estate
activity fell. Agricultural conditions were steady, as higher prices and strong harvests in some crops offset the negative
impacts of drought. Minority- and women-owned businesses saw improvements but noted price and supply chain challenges.
Employment and Wages
Worker Experience
Employment grew moderately since the last report, as
tighter labor supply forestalled much stronger growth.
Job postings continued to rise from very high levels
across the District. In Michigan’s Peninsula, current job
openings were almost double those from a year earlier.
Three surveys among construction, hospitality-tourism
and manufacturing firms found high demand for labor;
many firms were hiring to replace persistent turnover, but
an even larger percentage were looking to add to their
total headcount. Actual hiring was nonetheless more
challenging, with the large majority of respondents in all
three sectors reporting moderate to significant difficulty
in finding available workers.
Labor supply was tight across the District and quit rates
continued to trend up. A labor contact said that more
hospitality workers at a Minnesota airport have left their
positions, citing “hassles” such as the time spent going
through security. The presence of the Omicron variant
and subsequent cancellation of in-person conferences
and events brought more uncertainty for some hospitality
workers. A nonprofit contact said that many low-wage
workers who held two or more jobs before the pandemic
have decided to work less to meet childcare and other
needs. A healthcare labor contact said that nurse
retirements continued to put downward pressure on a
depleted workforce, and the availability of traveling
nurses has thinned. A South Dakota contact said that
workers in the energy sector expressed concerns over
vaccine mandates.
Wage pressures remained strong. Surveys since the last
report found strong wage growth in construction,
manufacturing, and hospitality-tourism; more firms
increased wages, and by larger amounts. More than 40
percent of hospitality and tourism firms reported wage
increases of 5 percent or more over the last year. A
South Dakota state budget proposal included a 6 percent
raise for state workers, including teachers and
corrections employees. Nonprofits were reportedly
dealing with growing turnover as workers left for higher
compensation offers in the private sector. Among firms,
said one contact, “The wage-increase conversation is
just as hot as the difficulty-hiring topic.”
Prices
Price pressures remained elevated. More than threequarters of preliminary respondents to the manufacturing
survey reported that they had increased prices charged
for their products in the previous year, while 70 percent
expected to increase their prices further in 2022.
Contacts in construction reported that materials costs
remained elevated across the board, but that plastic pipe
and plumbing fixtures in particular had spiked recently.
Responses to a hospitality and tourism survey indicated
greater recent pressure on input prices than final prices;
I-1
Federal Reserve Bank of Minneapolis
nearly 45 percent of hospitality firms said wholesale
prices had increased by more than 5 percent over the
previous 12 months, while about a quarter reported that
prices charged to customers had increased by that
magnitude. Retail fuel prices in District states as of late
December decreased modestly relative to a month
earlier. Prices received by farmers in November
increased from a year earlier for corn, soybeans, wheat,
canola, dry beans, potatoes, hay, hogs, cattle, turkeys,
chickens, and eggs, while milk prices decreased.
Manufacturing
District manufacturing activity increased briskly. A
manufacturing survey indicated growth in orders,
production, and capital spending through 2021
compared with the previous year for most firms. Profits
and productivity were flat, and employment fell slightly,
largely due to challenges in hiring. Firms’ expectations
for 2022 pointed to similar growth, with a positive outlook
for employment. A regional manufacturing index
indicated increased activity in Minnesota, North Dakota,
and South Dakota, relative to the previous month. A third
of supply managers surveyed expected supply chain
issues to get worse over the first six months of 2022.
Consumer Spending
Consumer spending grew moderately since the last
report. An industry contact said that retailers reported
better than expected holiday sales and in-store traffic,
while online shopping was also very active. A regional
mall contact noted similarly strong sales, particularly for
those with healthy staffing levels. Hospitality and tourism
firms widely reported improved revenues, but future
sentiment was mixed due to concerns over the Omicron
variant, particularly among firms catering to large events.
One Minnesota hotel said banquet and catering
revenues “are expected to be lower for some time.” Newvehicle sales—cars, trucks, marine, recreational, and
powersport—remained slow compared with a year ago,
due mostly to lack of inventory; used-vehicle sales
remained healthy as “some consumers are settling for a
used vehicle rather than waiting for a new vehicle,”
according to one dealer.
Agriculture, Energy, and Natural Resources
District agricultural conditions were steady since the last
report. Crop production in Ninth District states exceeded
earlier, drought-related predictions; however, production
of some commodities (dry beans, for example) was
much lower than 2020 levels. Most contacts expected
higher commodity prices to offset lower production and
increased input costs, except in the hardest-hit areas.
District oil and gas exploration activity increased
modestly since the previous report. District iron ore
mines were operating at capacity, with 2021 production
expected to pass pre-pandemic levels.
Minority- and Women-Owned Business Enterprises
Reports from minority-and-women-owned business
enterprises (MWBEs) in the District were generally
optimistic, but concerns lingered regarding labor
shortages, supply chain issues, and COVID. Almost
three quarters of respondents in a recent survey said
that they experienced price increases of more than
3 percent for nonlabor inputs. Businesses in the
hospitality and tourism industry reported improved
business activity but faced challenges finding workers.
Supply chain challenges were singled out by a
restaurant owner as their greatest challenge, adding that
food cost fluctuations were passed on to customers. The
CEO of a collaborative working space said that many are
entering entrepreneurship to diversify income streams
after experiencing employment instability during the
pandemic; she added that more women have chosen to
leave their jobs to launch a business. ■
Construction and Real Estate
Commercial and residential construction grew
moderately since the last report. Recent industry data
showed that the value of construction starts in District
states continued to trend higher, though some revenue
increases were attributed to inflated input costs. New
projects out for bid were higher in District states
compared with the same period last year. Supply chain
problems and higher input costs were dampening future
demand, according to a variety of sources.
Commercial real estate grew modestly overall. Retail
was buoyed by stronger-than-expected holiday traffic. A
regional mall contact noted that recent and expected
future leasing efforts were “quite strong.” But retail
vacancy rates continued to inch higher in some markets,
and another virus surge would dampen recent
momentum. Office vacancy rates remained high, as the
Omicron threat postponed return-to-office plans. Multifamily vacancy rates remained low in many markets and
recent investor sales suggested a strong market. Slower
residential real estate sales persisted in most markets
across the District, largely due to exceptionally low
inventory of homes for sale.
For more information about District economic conditions visit:
minneapolisfed.org/region‐and‐community
I-2
Summary of Economic Activity
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Employment and Wages
Prices
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Consumer Spending
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Manufacturing and Other Business Activity
Banking
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Energy
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Agriculture
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Real Estate and Construction
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J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ January 2022
Summary of Economic Activity
Robust expansion continued in the Eleventh District economy, with gains broad based across sectors. Growth in the
manufacturing, nonfinancial services, and retail sectors stayed strong, and growth in financial services picked up. Home
sales remained elevated, though construction capacity continued to be highly constrained. Solid apartment leasing
continued. The energy sector saw further expansion, while drought dampened agricultural conditions. Employment rose
robustly, and wage growth remained highly elevated due to widespread labor shortages. Supply-chain bottlenecks
continued to drive up costs, and prices rose at a rapid clip. Outlooks improved overall, though uncertainty increased
amid a new surge in COVID-19 cases and concern that labor market tightness and supply-chain disruptions will persist
well into 2022.
Fed survey of more than 300 Texas business executives, wages rose 7 percent in 2021, on average, up from
a reported 2 percent in 2020 and 4 percent in 2019.
Employment and Wages
Employment continued to expand robustly. Job gains
were widespread across services, manufacturing, energy
and construction, even amid reports of a dearth of applicants and acute hiring difficulty. A manufacturer noted
extreme new-worker turnover, saying three to five hires
were needed for even one to stay on. Labor shortages
were the top challenge in the healthcare industry, according to contacts. However, a large transportation
services firm said they recently received a surge of
applicants and were able to reach appropriate staffing
levels. There were a few mentions of concern that vaccine mandates would further exacerbate labor issues,
largely among oilfield contacts.
Prices
Input and selling price increases remained the highest in
recent history. In the energy sector, cost pressures accelerated to new heights. Construction contacts reported
that the cost of materials remained steady but elevated,
except for lumber prices which climbed over the past six
weeks. Many manufacturers noted acute price pressures
due to ongoing supply chain shortages, particularly
metals and food inputs. Auto dealers reported persistently high prices on used cars due to a lack of inventory.
Very strong annual price growth was seen among Texas
businesses in 2021, according to a year-end survey
conducted by the Dallas Fed. Respondents said input
prices rose about 10 percent, on average, and selling
prices rose 7 percent. These figures are markedly higher
than what was reported in recent years, and businesses
expect elevated price pressures in 2022 as well.
Wage growth remained at or near record highs. While
some contacts noted wage increases were concentrated
more among low-skill workers, others said they were
more evenly distributed across skill levels. Also, some
contacts reported that raising starting wages successfully attracted workers, while others noted that their increased wages were still being met with demands for
even higher pay. A large transportation services company said they increased wages for package handlers to
$20 an hour earlier in the year and recently offered
referral bonuses to employees, more paid time off, and
tuition reimbursement. According to a December Dallas
Manufacturing
Expansion in the Texas manufacturing sector continued
at an impressive clip in December, despite continued
supply-chain and labor challenges. Growth was led by
nondurables, particularly food and chemical manufactur-
K-1
Federal Reserve Bank of Dallas
ing. Sharply rising input costs have led to decreased
operating margins among many manufacturers, though
some have been able to pass on the higher costs to
customers. Outlooks improved over the reporting period,
though uncertainty continued to rise due to materials
delays and/or shortages, inflationary pressures, and the
Omicron variant of COVID-19.
Apartment leasing continued to be robust. Occupancy
was at or above the full mark cutoff in most markets, and
rents advanced further. Investor interest was highly
elevated, boosting sales activity and new development.
Demand for industrial space stayed exceptionally strong,
while office leasing was still sluggish, though activity has
ticked up.
Retail Sales
Financial Services
Retail sales continued to rise at an above-average pace
in December. Auto dealers reported an increase in sales
after several months of weakness, though they noted
that demand continued to exceed supply in both new
and used vehicles. A majority of retailers said supplychain disruptions were restraining sales. Outlooks improved, though some contacts expressed concern over
an expected persistence in supply-chain issues. An
equipment wholesaler said they project supply issues
through fourth quarter 2022.
Loan demand picked up pace over the past six weeks,
driving up overall loan-volume growth. Loan volumes
increased across lending types, led by commercial real
estate. Volume growth accelerated for commercial and
industrial loans, and consumer loans increased after
weakening slightly last period. Nonperforming loans
continued to decrease, and credit standards and terms
remained largely unchanged. General business activity
improved further, though contacts expressed concern
over inflation, supply-chain disruptions and labor shortages. Outlooks for loan demand and general business
activity six months from now remained optimistic.
Nonfinancial Services
Texas service sector activity continued to expand at a
robust pace overall. Revenue growth was broad based,
with particular strength seen in health care. Growth
slowed in transportation services and leisure and hospitality in December after surging in November, but it
remained strong. A major airline said they were just
beginning a solid recovery from the slowdown caused by
the Delta variant but now they are again seeing a pullback in demand from the Omicron variant. A hospitality
contact reported order cancellations for larger events
and private functions due to the resurgence of COVID.
Staffing services firms reported strong demand over the
past six weeks, particularly from the healthcare, manufacturing and construction sectors. Overall, services
firms said their biggest revenue restraint is limited operating capacity due to staffing shortages, particularly
absenteeism and difficulty hiring.
Energy
Oilfield activity rose over the past six weeks, with a notable increase in the Eleventh District rig count. Oil prices
moved down but were in line with 2022 expectations of
about $70 per barrel, a profitable level for most producers. Lead times for equipment in oilfield supply chains
were stabilizing at high levels. Delays are not expected
to worsen much more but are not expected to return to
normal before 2023. Industry sentiment was dented by
the Omicron variant and steady global production increases, though outlooks remained positive. Contacts
expect rigs to rise steadily through the end of 2022,
perhaps leading to an increase in drilling of about 25 to
35 percent next year.
Agriculture
Drought conditions worsened, with severe drought expanding in the northwest part of the District. Still, 2021
crop production was strong, particularly for cotton, outstripping last year’s output thanks to more harvested
acres and higher yields. Crop prices pushed higher
during the reporting period, boosting sentiment among
producers. However, contacts noted concerns over
surging input costs and limited availability of herbicides
and other items. On the livestock side, cattle prices
pushed higher and demand for all meats remained
strong. Outlooks are a bit uncertain, as dry conditions
could restrain production prospects for next year. ■
Outlooks remained optimistic, and expectations are for
increased activity going into 2022. Risks include the path
of the pandemic, supply-chain stresses, and inflation.
Construction and Real Estate
Home sales remained strong and in line with expectations. While sales rose, construction capacity continued
to be highly constrained, delaying home closings. Prices
crept higher and discounting was limited, though a few
builders noted offering incentives in select communities.
Inventories remained constrained and lot supply tight.
Builders' margins were solid, and outlooks were generally optimistic, though contacts voiced concern about
production challenges, lot pricing, and a potential increase in mortgage rates.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ January 2022
Summary of Economic Activity
Economic activity in the Twelfth District strengthened modestly during the reporting period of mid-November through
December. Employment grew at a moderate pace, while overall labor market conditions remained tight. Price levels
continued to climb significantly, driven by increases in shipping and labor costs. Sales of retail goods increased notably,
while conditions in consumer services deteriorated somewhat due to the latest wave of COVID-19 infections being
driven by the Omicron variant. Conditions in the agriculture and resource sectors remained mostly unchanged, whereas
the manufacturing sector strengthened slightly. Activity in the residential real estate market continued to increase albeit
at a slightly slower pace, while commercial real estate activity was little changed. Lending activity remained steady over
the reporting period.
Employment and Wages
insurance renewals, one of them raised wages more
than initially planned while the other absorbed the higher
costs.
Employment grew moderately, with contacts reporting no
signs of easing in the tight labor market. Firms across
the District continued to cite difficulties attracting qualified candidates for both skilled and unskilled positions.
Contacts in agriculture, retail, and food services reported
being unable to fill open positions despite repeated wage
increases over the past year, leading them to reduce
their hours and capacities. A few contacts observed
higher turnover rates have started to extend to management levels as well. Several contacts expressed concern
over what they perceive as a longer-term mismatch
between the skills needed and the availability of labor,
which could be further exacerbated by the aging population and the increasing numbers of people retiring during
the pandemic. A contact in the Pacific Northwest mentioned addressing the region’s persistent shortage of
health-care employees by plans to bring in foreign medical workers in the medium term. One employer in the
technology sector noted increased competition from
companies in other geographies that offer fully remote
positions.
Prices
Prices continued to climb at a brisk pace across the
District. Notable price hikes occurred for energy, agricultural products, construction materials, and menu items at
restaurants. Additional shipping and labor costs contributed to further price increases that many companies
reported passing on to consumers. Most contacts expected these pricing pressures to ease in 2022 as supply
chain issues are resolved, although a few raised concerns that price increases arising from wage pressures
might be longer lasting.
Retail Trade and Services
Sales of retail goods continued to increase notably. Ecommerce sales remained robust, while sales at brickand-mortar stores were up compared to last year’s holiday season, although not as high as holiday sales in
2019. Furthermore, several contacts noted that retail
store staff shortages resulted in reduced hours, which
further constrained sale volumes. Although a few contacts mentioned supply chain issues and inventory shortages for vehicles and some food products, most other
retailers, especially clothing and electronics, reported
having ample inventory levels. A few contacts observed
that higher prices moderated holiday sales somewhat. A
contact in the Pacific Northwest noted that many retailers
are looking into acquiring their own warehouses and
Wage pressures increased further over the reporting
period due to the continued competition for talent. Many
employers mentioned giving year-end bonuses to top
performers and boosting base salaries by 3 to 10 percent. Several contacts also mentioned significantly expanding equity compensation at the executive level in
order to retain talent. Two contacts noted that to help
employees with the unexpectedly higher cost of health
L-1
Federal Reserve Bank of San Francisco
manufacturing facilities to mitigate supply chain issues in
the future.
ers for this year’s harvest.
Conditions in the consumer and business services sectors deteriorated in recent weeks. The latest wave of
infections driven by the Omicron variant has negatively
impacted the travel and hospitality industry, with hotel
bookings being cancelled and staff shortages at airlines.
Demand for food services decreased somewhat, and
many entertainment shows and events have been either
cancelled or postponed. By contrast, demand for laboratory testing and medical services remained high, but
supply was constrained by low inventories and medical
worker shortages. A contact in management consulting
noted that with many businesses navigating uncertainties and hybrid work stances, demand for consulting
services has surged and some strategic services are
sold out for most of 2022.
Activity in the residential real estate market continued to
increase, although at a slightly slower pace compared to
the previous reporting period. Residential construction
and sales remained strong in both single-family and
multifamily housing sectors. However, the pace of home
price increases has slightly decelerated, and brokers in
California mentioned that homes were taking a bit longer
to sell. In addition, supply chain challenges and labor
shortages continued to hamper new construction, with
one contact in the Mountain West noting delays of more
than six months in getting various appliances and building materials. A few contacts also mentioned higher
rents partially due to continued migration into the Pacific
Northwest. A contact in Alaska noted that applications
for affordable housing have increased threefold relative
to the pre-pandemic period.
Real Estate and Construction
Manufacturing
Activity levels in the manufacturing sector rose slightly.
New orders were either steady or rising for fabricated
metals, steel, and renewable energy equipment. However, continued supply chain disruptions and labor shortages continued to hold back production. As a result, one
contact in the Pacific Northwest noted that lead times for
some machinery equipment have increased to up to two
years. Although manufacturers’ capacity utilization rates
were up and most were able to access raw materials,
input costs have continued to increase and remained
volatile.
Commercial real estate activity was unchanged on balance. On one hand, demand for new office and retail
space was noted to have decreased somewhat, with
lease rates falling due to increased uncertainty stemming
from the emergence of the Omicron variant. On the other
hand, demand for industrial and manufacturing spaces
increased further, with related lease rates increasing as
well. A contact in Southern California noted that the
decision by many companies to reduce their office space
has pushed commercial real estate investors to look
elsewhere for long-term investment.
Agriculture and Resource-Related Industries
Financial Institutions
Conditions in the agriculture and resource-related sectors remained mostly unchanged. Exporters of agricultural products continued to be challenged by shipping bottlenecks and port delays, with no signs of easing. As a
result, one exporter reported selling more agricultural
products domestically instead. Demand from food services was noted to have softened in recent weeks due to
concerns related to the Delta and Omicron variants,
while retail demand for agricultural products remained
steady. Crop yields for tree fruit, nuts, and raisins were
lower than anticipated due to weather effects and carryforward of low inventories in 2020. A grower in the
Pacific Northwest noted that due to a lack of available
domestic labor, many companies in the area have hired
a higher proportion of foreign seasonal agricultural work-
Lending activity remained steady over the reporting
period. Consumer loan demand continued to be strong
especially for refinancing, while demand for commercial
loans remained slow due to businesses holding excess
cash. Liquidity remained high, as did the asset quality of
loan and investment portfolios. Although interest margins
continued to be squeezed, several banks mentioned that
loan fees from processing PPP loans have helped boost
margins this year. One contact in Southern California
mentioned that competition for loans accelerated further,
including that from fintech companies. Another contact in
the clean energy investment space observed that green
bond issuances and climate-focused SPAC (special
purpose acquisition companies) activity have picked up
in recent weeks. ■
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Cite this document
Federal Reserve (2022, January 25). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20220126
@misc{wtfs_beige_book_20220126,
author = {Federal Reserve},
title = {Beige Book},
year = {2022},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20220126},
note = {Retrieved via When the Fed Speaks corpus}
}