Beige Book

For use at 2:00 PM EST

Wednesday

March 2, 2022

The Beige Book

Summary of Commentary on Current Economic Conditions

By Federal Reserve District

February 2022

Federal Reserve Districts

Minneapolis

Boston

New York

Chicago

Cleveland

Philadelphia

San Francisco

Kansas City

Dallas

Alaska and Hawaii

are part of the

San Francisco District.

St. Louis

Richmond

Atlanta

The System serves commonwealths and territories as follows: the New York Bank serves the

Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves

American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

This report was prepared at the Federal Reserve Bank of St. Louis based on information collected on

or before February 18, 2022. This document summarizes comments received from contacts outside

the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

National Summary

Boston

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A-1

The Beige Book is a Federal Reserve System publication about current

economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety

of mostly qualitative information, gathered directly from each District’s

sources. Reports are published eight times per year.

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What is the purpose of the Beige Book?

First District

New York

Second District

Philadelphia

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Third District

Cleveland

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Fourth District

Richmond

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Fifth District

Atlanta

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Sixth District

Chicago

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Seventh District

St. Louis

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Eighth District

Minneapolis

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Ninth District

Kansas City

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Tenth District

Dallas

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Eleventh District

San Francisco

Twelfth District

What is the Beige Book?

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The Beige Book is intended to characterize the change in economic

conditions since the last report. Outreach for the Beige Book is one of

many ways the Federal Reserve System engages with businesses and

other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book

can complement other forms of regional information gathering. The

Beige Book is not a commentary on the views of Federal Reserve

officials.

How is the information collected?

Each Federal Reserve Bank gathers information on current economic

conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other

sources. Contacts are not selected at random; rather, Banks strive to

curate a diverse set of sources that can provide accurate and objective

information about a broad range of economic activities. The Beige

Book serves as a regular summary of this information for the public.

How is the information used?

The information from contacts supplements the data and analysis used

by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative nature of the

Beige Book creates an opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in

the available economic data. This information enables comparison of

economic conditions in different parts of the country, which can be

helpful for assessing the outlook for the national economy.

The Beige Book does not have the type of information I’m looking

for. What other information is available?

The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of

statistical releases compiled by the Federal Reserve Board is available

here, links to each of the Federal Reserve Banks are available here,

and a summary of the System’s community outreach is available here.

In addition, Fed Listens events have been held around the country to

hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—

whose members are drawn from a wide array of businesses, non-profit

organizations, and community groups—to hear diverse perspectives on

the economy in carrying out its responsibilities.

National Summary

The Beige Book ■ February 2022

Overall Economic Activity

Economic activity has expanded at a modest to moderate pace since mid-January. Many Districts reported that the

surge in COVID-19 cases temporarily disrupted business activity as firms faced heighted absenteeism. Some Districts

attributed a temporary weakening in demand in the hospitality sector to the rise in cases. Severe winter weather was

also cited as disrupting activity. As a result, consumer spending was generally weaker than in the prior report. Reports

on auto sales were mixed. Manufacturing activity continued to grow at a modest pace. All Districts noted that supply

chain issues and low inventories continued to restrain growth, particularly in the construction sector. Reports from

banking contacts indicated some weakening of financial conditions, although loan demand was generally unchanged.

Demand for residential real estate was generally strong, although many Districts reported no change in home sales due

to seasonal trends and low inventories. Agriculture reports were somewhat mixed, as some Districts experienced difficult growing conditions while others benefited from higher crop prices. Reports on the energy sector indicated modest

growth. Among reporting Districts, the overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.

Labor Markets

Employment increased at a modest to moderate pace. Widespread strong demand for workers remained hampered by

equally widespread reports of worker scarcity, though some Districts reported scattered signs of improving labor supply. Many firms had difficulty maintaining their staffing levels due to high turnover; this challenge was exacerbated by

COVID-19 disruptions in January, though workers and firms recovered more quickly than during previous waves. Firms

continued to increase compensation and introduce workplace flexibility to attract workers—especially in historically lowwage positions—with mixed success. Contacts reported they expect the tight labor market and consequent strong

wage growth to continue, though a few Districts reported signs of wage growth moderating.

Prices

Prices charged to customers increased at a robust pace across the nation. A few Districts reported an acceleration in

prices. Rising input costs were cited as a primary contributing factor across a broad swath of industries, with elevated

transport costs particularly significant. Labor cost increases and ongoing materials shortages also contributed to higher

input prices. Firms reported an increased ability to pass on prices to consumers; in most cases, demand has remained

strong despite price increases. Firms reported they expect additional price increases over the next several months as

they continue to pass on input cost increases.

Highlights by Federal Reserve District

Boston

New York

Business activity expanded at a slight to modest pace.

Labor demand remained very strong, but employment

appeared roughly stable. Upward wage pressures remained substantial but eased for some positions. Prices

increased moderately. Contacts were optimistic for

spring but noted downside risks tied to inflation and

supply chain disruptions.

Growth stalled in the latest reporting period, constrained

by ongoing supply disruptions, worker shortages, and

the Omicron outbreak. Moreover, unusually high absenteeism made it difficult for firms to maintain adequate

staff. Businesses continued to report substantial increases in selling prices, input prices, and wages. Despite

these challenges, contacts remained optimistic about the

near-term outlook.

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National Summary

Philadelphia

St. Louis

Business activity continued to grow modestly during the

current Beige Book period, and some sectors remained

below pre-pandemic levels. The surge in COVID-19

cases from the Omicron variant caused significant business disruptions before easing. The labor market remained tight with modest growth, while wages and prices

grew sharply. However, there were signs that wage and

price increases may be plateauing.

Economic conditions have remained unchanged since

our previous report. Employers reported robust wage

increases and continued difficulties finding workers.

Firms reported improved ability to pass on price increases and anticipate continued increases. The Omicron

COVID-19 variant contributed to decreased activity in the

transportation and hospitality sectors.

Cleveland

The region’s economy grew moderately over the first

weeks of the year. Price pressures remained strong.

Though employment increased overall, many firms reported decreased staffing levels due to higher turnover

and recruitment difficulty. Contacts generally felt that

wage acceleration was driven by tight labor markets

rather than inflation expectations. New entrepreneurs

reported quitting their outside jobs or cutting hours.

Minneapolis

The District economy grew at a more modest pace as

the Omicron wave temporarily dampened activity in highcontact services. Employment rose moderately. Labor

shortages and supply chain challenges resulted in widespread increases in wages, nonlabor costs, and selling

prices. Firms expected a solid year for sales, but they

were concerned that labor scarcity and supply chain

difficulties would persist.

Kansas City

Richmond

The regional economy has grown moderately since our

previous report. Firms across a variety of sectors reported modest to strong growth in demand, but many struggled to meet that demand due to shortages of labor and

persistent supply chain issues. In many cases, higher

costs to businesses were passed through to customers,

leading to a continued elevated rate of price growth.

The Tenth District economy expanded at a modest pace

in the first two months of the year. The temporary surge

in COVID-19 cases slowed spending and hours worked

in the leisure and hospitality sector, but activity rebounded quickly and grew steadily across other services and

manufacturing sectors. Prices grew at a robust rate, and

nearly all contacts reported they expect cost pressures

to persist throughout the year.

Atlanta

Dallas

Economic activity expanded moderately. Labor markets

remained tight and wage pressures grew. Nonlabor

costs rose. Retail sales were strong. Leisure travel softened somewhat. Housing demand was robust. Commercial real estate conditions were mixed. Manufacturing

activity was robust. Banking conditions were stable.

Expansion in the District economy moderated, with the

COVID-19 surge exacerbating labor and supply chain

shortages and disrupting demand in certain sectors.

Employment rose fairly robustly, and wage growth

pushed to new highs. Supply chain issues continued to

drive up costs, and prices rose at a rapid clip. Outlooks

remained positive, though uncertainty spiked.

Chicago

San Francisco

Economic activity increased moderately. Employment

increased strongly; consumer spending, business spending, and manufacturing grew modestly; and construction

and real estate activity was up slightly. Wages and prices rose rapidly, while financial conditions deteriorated

some. Expectations for 2022 agriculture income moved

up.

Economic activity strengthened moderately over the

reporting period. Employment grew further while overall

conditions in the labor market remained tight. Wages

and price levels climbed notably. Retail sales increased

strongly, while conditions in the consumer and business

services sectors picked up following the peak of the

Omicron wave. Lending activity was steady.

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Federal Reserve Bank of

Boston

The Beige Book ■ February 2022

Summary of Economic Activity

Business activity expanded at a slight to modest pace in recent weeks. Consumer spending on goods, including autos,

increased at a moderate pace, but restaurants sales plummeted during the Omicron surge. Manufacturers enjoyed

robust demand, and revenues increased slightly on balance. Revenues at staffing firms were mixed but up modestly on

average. Office leasing activity gained some momentum, and rents for industrial and life sciences space reached record

highs. Home sales slowed further in a return to seasonal norms. Labor demand remained very strong, but employment

appeared roughly stable as some firms struggled to hire and/or retain workers. Upward wage pressures remained substantial but eased for some positions. Prices increased moderately on average. Contacts were almost unanimously

optimistic for spring, although some mentioned downside risks tied to inflation and supply chain issues.

crease their prices because demand was exceeding

production capacity. High freight costs caused one retailer to forgo shipments of otherwise attractive merchandise. Restaurateurs relayed that in the last quarter food

input prices increased at their fastest pace in 40 years.

Restaurants’ menu prices also increased, but incomplete

pass-through led to lower profits. According to a New

Hampshire auto industry contact, new and used car

prices remained very high, but used car prices softened

somewhat at recent auctions. Staffing firms’ billing rates

increased commensurate with increases in pay rates,

leaving their margins roughly unchanged.

Labor Markets

First District labor markets remained tight on balance, as

upward wage pressures persisted, and employment

appeared stable. Headcounts were flat among retail

contacts. Restaurant contacts noted a modest improvement in labor supply but did not report on headcounts.

Manufacturing headcounts were up by modest to large

margins on a year-over-year basis but were mostly

stable recently. Manufacturers offered mixed descriptions of the labor market, as some experienced no hiring

difficulties and others complained of high turnover or

faced a scarcity of candidates. Staffing firms noted that

turnover remained elevated at their own firms as well as

at client firms. Staffing contacts also said that wages

faced strong upward pressure across a wide variety of

jobs and skill levels amid rising price inflation. However,

wage growth appeared to slow or level off for selected

positions and was relatively moderate among manufacturers. Contacts expected robust labor demand to persist

but said that wage growth could slow moving forward in

light of the substantial wage increases already seen in

recent months.

Retail and Tourism

Contacts reported a strong holiday season and a solid

start to 2022 for retail sales, while auto sales increased

moderately, and restaurant sales dropped due to the rise

of the Omicron variant. Among retailers, higher inventories boosted December 2021 and January 2022 sales at

a salvaged-goods chain, and an online goods seller

continued to enjoy volume and revenues well above prepandemic levels. The latter seller also said that inventories had stabilized somewhat and were expected to

normalize further in the coming months. Auto sales in

New Hampshire increased moderately in January owing

in part to improved inventories of new vehicles, but supplies are not expected to fully normalize until 2023. Sales

of RVs defied typical seasonal trends and remained

robust throughout the winter. Massachusetts restaurant

Prices

Prices increased moderately on average, but reports

varied widely across contacts. Buyers of computer chips

complained of “extortive” pricing while other goods makers enjoyed stable input prices. Although some manufacturers held off on raising their prices, those selling directly to consumers said that they had been forced to in-

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Federal Reserve Bank of Boston

owners suffered a very challenging winter due to the

surge of the Omicron variant in December and January.

Sales were weakest in the Greater Boston area while

suburban and outlying areas saw fewer disruptions.

Nonetheless, a sense of optimism is emerging about the

return of restaurant guests in the coming months as the

rate of COVID infections declines and food supplies

stabilize .

expressed concern over the inflation outlook, however,

and one perceived an increased risk of recession.

Commercial Real Estate

The First District’s commercial real estate markets were

mostly stable in recent weeks. The life sciences and

industrial property sectors remained very strong, even

“frothy,” as rents reached record levels and vacancies

hovered near zero. Pension funds fueled strong investment demand for these sectors, but contacts perceived

downside risks to returns. The office leasing market

showed some signs of life, with relative strength in the

suburbs, but stayed slow relative to historical norms.

Multifamily construction increased amid rising rents, but

supply and labor shortages caused some delays. Retail

market performance varied widely by location and type

of business, as outlets that relied on office workers continued to struggle, grocery-anchored centers stayed

strong, and experiential retail started to bounce back

after an Omicron-induced slowdown. Contacts expected

further momentum in office leasing for spring, but large

office users are still poised to give up significant amounts

of space. The industrial outlook was mixed, as at least

one contact expected a slowdown in demand.

Manufacturing and Related Services

All eight contacts reached this round reported strong

demand, but in some cases supply chain issues held

back revenue growth, and sales increased slightly on

average. Supply disruptions mostly affected production,

but some firms’ customers cancelled their orders because other suppliers could not deliver. One firm suffered from production delays in January when many

workers were out sick with COVID. Most contacts were

trying to hire, although one planned to focus on retention

after expanding headcounts by a very large margin in

2021. Planned wage increases were low to moderate,

but signing bonuses and recruiting fees also boosted

labor costs. Contacts reported no major revisions to

capital expenditure plans, but some indicated that

spending was up due to “catch-up” following limited

investment during the pandemic. The outlook was generally positive although some contacts expected supply

chain problems to persist or even intensify moving forward.

Residential Real Estate

Residential real estate sales posted a modest seasonal

slowdown in December and January as prices were

stable on balance and inventories remained very low.

(All New England states except Connecticut reported

results.) Closed sales were down over the year (to either

December 2021 or January 2022) for both single-family

homes and condominiums. Although the decline in single

-family sales extended recent trends, the slide in condo

sales marked a reversal from the previous report. Several contacts interpreted the latest results as a return to

normal seasonal patterns, together with the fact that in

late 2020 the market had been unusually busy. Home

inventories fell and median prices increased year-overyear in all reporting markets, by robust margins. Those

over-the-year changes were mostly on par with the previous report, with the exception that Boston’s condo prices

posted somewhat slower growth recently. The Rhode

Island, Massachusetts, and Boston contacts all anticipate high demand this spring, as many prospective

buyers are expecting mortgage rates to increase and are

eager to purchase a home before that happens.■

Staffing Services

Revenues at staffing firms increased modestly on average, as two contacts reported no changes from the

previous quarter, one recorded substantial growth, and

one experienced a modest decline. Talent acquisition

remained a challenge for all firms, especially in filling

temporary positions and jobs requiring in-person work.

One contact offered bonuses to new hires who stayed in

their roles for at least 90 days, and another boosted

salary for its own recruiters to improve retention. Scarcity

of childcare continued to crimp labor supply, but contacts

said they were surprised to have seen relatively little

pushback to vaccine mandates. In response to labor

scarcity one firm moved to accelerate the placement of

available candidates, and another said that the ease of

starting remote work had also sped up the hiring process. However, the faster placement pace put more

pressure on clients to train and fully vet new hires. Looking ahead, all contacts were optimistic about the coming

months in light of the resilience the economy had shown

during the Omicron surge and the strong ongoing demand for workers in a variety of roles. Some contacts

For more information about District economic conditions visit:

www.bostonfed.org/regional-economy

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Federal Reserve Bank of

New York

The Beige Book ■ February 2022

Summary of Economic Activity

Growth stalled in the Second District in early 2022, with ongoing supply disruptions, worker shortages, and the Omicron

outbreak impeding activity. Despite these challenges, contacts expressed fairly widespread optimism about the nearterm outlook. Businesses continued to report substantial increases in selling prices, input prices, and wages. The job

market has remained exceptionally tight, with businesses continuing to add staff, on net, and dealing with unusually high

absenteeism. Consumer spending weakened noticeably in January, though retailers noted some rebound in business

toward the latter part of the month and into early February. The home sales and rental markets remained robust in early

2022, and commercial real estate markets were slightly stronger. While commercial construction activity remained

dormant, there was some pickup in multifamily residential construction. Finance-sector contacts reported some pullback

in activity, while regional banks reported some weakening in household loan demand, along with steady to lower delinquency rates.

Labor Markets

Prices

Despite ongoing worker shortages, job growth picked up

to a moderate pace. Staffing agencies reported that job

openings remained plentiful, particularly for technology,

sales, and human resource workers. One agency in New

York City noted that many job candidates are being selective based on telecommuting policies, while an upstate

New York agency noted that vaccination policies are a

major sticking point. Worker shortages persist across a

wide range of industries and occupations. Businesses in

most major industry sectors plan to add staff, on net, in

the months ahead.

The vast majority of businesses continued to report

rising input prices. Businesses noted shortages and

exceptionally high costs of freight, as well as a wide

range of supplies. Contacts in all major industry sectors

expect input prices to rise further in the months ahead.

A large and growing proportion of businesses report that

they have raised selling prices, most notably in the manufacturing, wholesale & retail trade, and leisure & hospitality sectors. One large retail chain indicated that its

selling prices in most categories would be ratcheted up

over the course of 2022, reflecting higher merchandise

acquisition costs. A large but steady share of businesses

indicated plans to raise selling prices in the months

ahead.

Contacts in all sectors reported that they were raising

wages and planned to do so in the months ahead. An

upstate New York employment agency noted particularly

rapid wage growth, and a New York City agency reported

that companies have become somewhat more flexible on

pay. The January 1st hike in minimum wages across

New Jersey and much of New York State reportedly

prompted many businesses in manufacturing, distribution, and leisure & hospitality to raise wages more than

they otherwise would have—not just for workers at the

threshold but for those somewhat higher in the wage

distribution as well to mitigate wage compression.

Consumer Spending

Consumer spending weakened somewhat in early 2022.

Non-auto retailers reported that sales fell in January due

to the Omicron outbreak and harsh winter weather, but

showed signs of rebounding late in the month and into

early February. Supply disruptions have continued to

cause pockets of stockouts, but inventories overall have

remained at or near desired levels. New York City continued to lag the rest of the region, hampered by the

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Federal Reserve Bank of New York

Omicron wave. Consumer confidence among New York

State residents declined in January but remained at a

fairly high level.

of homes on the market. However, demand has remained

strong, and prices have risen. Real estate contacts in

upstate New York indicate that inventories remain exceptionally low, driving up prices and spurring multiple offers

and bidding wars. Housing affordability is a growing concern in the region, and efforts are underway to rehabilitate

“zombie” homes in some areas and convert some commercial space to residential.

New vehicle sales remained weak in early 2022, restrained by the ongoing lack of inventory. The microchip

shortage, which has kept inventories low, is not expected

to abate until the second half of the year. Moreover,

sales of used vehicles, which had been fairly solid in late

2021, also weakened, reflecting a combination of depleted inventory and exceptionally high prices, which have

deterred some prospective buyers.

New York City’s residential rental market has picked up

steam in recent weeks, as vacancy rates have continued

to edge down and rents have accelerated. Rents have fully

rebounded across much of the city.

Manufacturing and Distribution

Commercial real estate markets were mixed but, on balance, slightly stronger. Office markets were mostly steady,

with both office availability rates and market rents essentially flat throughout most of the District. However, there

were scattered signs of improvement in northern New

Jersey, Lower Hudson Valley, and Fairfield County. The

industrial market has continued to strengthen modestly,

with vacancy rates steady but rents continuing to escalate.

In contrast, the market for retail space, which had shown

signs of picking up in late 2021, has weakened in the first

few weeks of this year.

Manufacturing activity was essentially flat in early 2022,

whereas businesses in the wholesale, transportation,

and warehousing sectors continued to report fairly brisk

growth. Contacts in these areas have indicated that

continued worsening in supply disruptions and escalating

prices have further impeded activity. Still, businesses in

all of these sectors continued to express optimism about

the near-term outlook, though to a somewhat lesser

degree than in the last report.

Services

Activity in the service sector contracted in early 2022. In

particular, leisure & hospitality businesses noted further

weakening in activity—apparently driven largely by the

Omicron outbreak. Education & health providers also

noted some slowing. However, businesses in the information and professional & business services sectors

reported that activity was steady to slightly higher. Still,

businesses in all these industries remained broadly

optimistic about the near-term outlook.

Construction activity was sluggish, likely reflecting unseasonably harsh winter weather. Non-residential construction

starts weakened from already low levels, while multi-family

residential starts picked up modestly. There continues to

be a good deal of multi-family construction in the pipeline.

Looking ahead, construction sector contacts expressed a

good deal more optimism than in recent months about the

general outlook, despite the ongoing challenge of elevated

materials prices, supply bottlenecks, and shortages.

The Omicron outbreak led to a slump in both tourism and

related service-sector activity in New York City in January, though there were scattered signs of a pickup in

February. Hotel occupancy and revenue, which fell

sharply in January, have begun to rebound, and trade

shows have picked up, and this trend is expected to

continue into March. A record low number of Broadway

shows were open in January, but a dozen new shows

are slated to open soon. Subway ridership, which had

turned down sharply in December, began to resume its

upward trend in January and through mid-February.

Banking and Finance

Contacts in the broad finance sector reported some weakening in business conditions but remained fairly optimistic

about the outlook. Small to medium-sized banks across

the District reported weaker demand for consumer loans

and residential mortgages, but steady demand for commercial loans and mortgages. Refinancing activity was

unchanged on net, though one contact noted strong demand from the commercial segment, reportedly driven by

the potential for higher rates in the coming months. Credit

standards were largely unchanged across all loan segments, while loan spreads narrowed slightly. Delinquency

rates held steady for consumer loans and residential mortgages and decreased for commercial loans and mortgages. ■

Real Estate and Construction

Home sales and rental markets have been robust,

though activity has been constrained thus far in 2022,

due to harsh weather, the Omicron wave, and a dearth

For more information about District economic conditions visit:

www.newyorkfed.org/regional‐economy

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Federal Reserve Bank of

Philadelphia

The Beige Book ■ February 2022

Summary of Economic Activity

On balance, business activity in the Third District continued to grow modestly in the current Beige Book period. Activity

in several sectors had not yet returned to pre-pandemic levels. Since the prior Beige Book, the rate of cases from the

Omicron variant of COVID-19 continued to surge to an all-time high in mid-January, then quickly receded to levels last

observed in November. Many contacts noted that disruptions to business operations were significant and pervasive, as

workers called in sick. The rate of all persons being fully vaccinated rose to 70 percent. Employment grew modestly as

firms continued to face challenges in hiring and retaining workers. Wages rose sharply again, but there were signs that

the increases may be plateauing. Prices also rose sharply overall, but among manufacturers, price expectations fell

significantly in our quarterly survey. On net, expectations for continued economic growth over the next six months

flagged somewhat for nonmanufacturers but held steady for manufacturers.

Labor Markets

tion cost per worker, with a trimmed mean of 5.5 percent

in the first quarter of 2022 – down from 5.8 percent in the

fourth quarter of 2021.

Employment grew modestly, with growth in most sectors

more subdued than last period. The share of firms reporting employment increases remained near one-fifth of

the nonmanufacturing firms and edged down to one-third

among the manufacturers. Overall, about one-fifth of the

firms reported a rise in average hours worked; less than

one-tenth reported a decline.

Prices

On balance, prices rose sharply over the period – more

than the prior period’s moderate increase – and were

more pervasive. The share of manufacturers reporting

higher prices for factor inputs increased to 74 percent,

while those receiving higher prices for their own products

edged up to 54 percent. The share of nonmanufacturers

reporting higher prices for their inputs surged to 70 percent, while the share receiving higher prices from consumers for their own goods and services rose to 45

percent.

Staffing firms and most employers continued to report

significant difficulty attracting and retaining labor, while

the surge in Omicron cases created daily staffing challenges. One staffing firm noted that one staff member

spent most of two weeks just keeping tabs on COVID

cases among its placements.

Wages continued to rise substantially, but reports suggest that the rate of change may be plateauing. In our

monthly surveys, the share of nonmanufacturing firms

reporting higher wage and benefit costs per employee

fell to 54 percent in February from 59 percent in December. Less than 5 percent of the firms reported lower

compensation, and that represented an increase from

prior months when almost no firms reported lower compensation.

Contacts offered a mix of responses regarding inflation,

with some expressing optimism that the cost side of

inflation will ease first as supply chains improve, but that

wage inflation may continue for longer.

From our quarterly survey of firm price expectations,

contacts reported further increases in the prices received

for their own goods and services over the past year. The

trimmed mean for reported price changes rose to 5.6

percent for nonmanufacturers and to 9.4 percent among

manufacturers. These price changes have risen steadily

since the fourth quarter of 2020, when contacts reported

On a quarterly basis, firms reported a somewhat lower

expectation of the one-year-ahead change in compensa-

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Federal Reserve Bank of Philadelphia

increases of 1.4 percent and 1.5 percent for manufacturers and nonmanufacturers, respectively.

cial real estate and auto lending and rose moderately for

home mortgages and other consumer loans. However,

commercial and industrial lending and home equity lines

fell modestly. Credit card volumes declined moderately –

similar to the seasonal decline observed during the same

period in 2019.

Looking ahead one year, the prices that firms anticipate

receiving edged lower overall – the expected rate of

growth fell significantly to 6.4 percent among manufacturers from 7.3 percent in the prior quarter – the first

decline since price expectations began rising over one

year ago. The rate for nonmanufacturers edged up to 5.0

percent from 4.9 percent in the prior quarter.

Bankers, accountants, and attorneys noted a continued,

if not an increasing, level of uncertainty on the part of

their clients. Many are flush with cash and making no big

plans, except for automating where possible. Finding

and paying for labor remains their primary challenge.

Manufacturing

On average, manufacturing activity continued to grow

modestly. Overall, the share of firms reporting increases

in shipments and new orders edged higher than in the

prior period; however, reports softened in recent weeks.

Reports of rising backlogs were more pervasive, but

increases in delivery times and inventories were less

widespread.

Real Estate and Construction

Homebuilders reported steady contract signings and

construction activity but continued to cite problems securing materials and labor, as well as rising costs for

both. Amid a heated market for multifamily housing, a

year-end deadline to qualify for a popular 10-year property tax abatement in Philadelphia prompted developers

to pull permits for eight times more apartment or condo

units than in 2019. Contacts noted that the nearly 23,000

permitted units will not all be built, but that completing

even a fourth of the total would put downward pressure

on apartment rents and condo prices.

Consumer Spending

Retailers (nonauto) and restaurateurs continued to report

modest growth, despite staffing disruptions and customer caution rising with the Omicron surge. Contacts noted

rising costs as a threat, but that “supply chains were

better but fragile.”

Existing home sales held steady at high levels; however,

new listings remained scarce, and available homes

continued to sell quickly near the asking price. Contacts

noted that housing affordability continues to deteriorate

for first-time buyers, generating strong demand for new

rental units.

Limited supply continued to constrain new auto sales at

very low levels. Contacts broached no guess as to when

the microchip shortage or the congestion at the Los

Angeles and Long Beach ports would ease.

Overall, tourism declined slightly, as the Omicron surge

prompted firms to delay a resumption of business travel

and to postpone group events, as well as cause a dip in

some leisure travel. Ski resorts seemed exempt from

fear of COVID and were constrained only by lack of staff.

Construction activity and leasing activity held steady for

most segments of nonresidential real estate. Contacts

continued to cite multifamily housing, institutional projects, and industrial/warehouse space as the strongest

markets. Prospects for office space and downtown retail

will become clearer once workers return to offices on a

consistent basis. ■

Nonfinancial Services

On balance, nonmanufacturing activity grew slightly –

contacts noted negligible growth early in the period but

reported some recovery by the period’s end. Overall, the

share of firms reporting increases in sales fell from onehalf to about two-fifths, while the share reporting increases in new orders edged down to about one-fourth. However, at the outset of the period, these shares were

nearly equaled by the shares of firms reporting decreases in sales and in new orders. Reports of decreases

subsequently subsided.

Financial Services

The volume of bank lending (excluding credit cards) was

flat during the period (not seasonally adjusted); by comparison, loan volumes grew slightly during the same

period in 2019. Loan volumes grew modestly in commer-

For more information about District economic conditions visit:

www.philadelphiafed.org/regional-economy

C-2

Federal Reserve Bank of

Cleveland

The Beige Book ■ February 2022

Summary of Economic Activity

The Fourth District economy grew at a slower, more modest pace in recent weeks. Demand was generally solid, but the

surge of Omicron-related coronavirus infections temporarily dampened activity in some high-contact services such as

restaurants and retail stores. Contacts reported that their outlooks were largely unchanged and that they continue to

expect a strong year for sales. There were scattered reports that supply chain disruptions may have eased for some

materials. That said, contacts expected it could be the second half of this year or even 2023 when supply chains normalize. Amid persistent labor shortages, employment increased moderately, while pay increases were widespread.

Reports of rising input costs and prices were also widespread. Contacts expected that nonlabor costs will continue to

increase in the near term, possibly at a slower rate than last year. However, they expected price pressures to remain

elevated in the coming months as they keep up with cost increases and, in some cases, as they try to recover lost profit

margins.

Labor Markets

agents expected wage growth for lower-paid workers to

slow in the coming year, saying that businesses cannot

afford to pay much more. However, contacts expect

wage pressures for higher-skilled workers to remain

elevated.

Employment rose moderately during the reporting period. A few firms indicated it had become slightly easier to

hire, but for the most part reports of labor shortages

remained widespread. Contacts with customer-facing

operations noted that the spread of the Omicron variant

had temporarily disrupted operations in early January as

staff absences increased. However, such disruptions

quickly abated as the month progressed. Many firms

commented that employee turnover was high for various

reasons, including a greater desire to work remotely,

receive higher wages, change careers, or find better

working conditions. One university representative expressed great concern that educators were leaving the

profession in large numbers because the current work

environment was “not what they had signed up for.”

Generally, contacts saw few reasons to believe labor

supply will soon improve meaningfully.

Prices

Nonlabor input costs rose for most contacts. In a few

instances, contacts noted that some costs, such as for

steel, had stabilized or come down somewhat. However,

such reports were the exceptions. Higher transportation

costs were commonly cited as a major strain on firms.

One manufacturer noted that freight costs had almost

doubled in the past two months. Also, builders noted that

lumber prices trended back up after a brief respite late

last year. Materials shortages forced some firms to purchase in spot markets or from retailers (as opposed to

wholesalers), a situation which greatly added to their

costs. Contacts generally expect costs to rise in the

coming months, but some indicated the rates of increases could slow from what was seen last year.

Reports of wage increases were widespread across

sectors as firms struggled with the scarcity of workers.

Contacts indicated that recent pay raises were often in

the high single-digit or low double-digit percentages and

that wage pressures were broad across the pay scale.

Despite substantial pay raises, contacts had mixed

results in attracting or retaining workers. A few staffing

Most firms raised prices as they passed through higher

costs of materials, labor, and transportation to customers. A little less than half of contacts who had tried to

raise prices indicated that customers had been more

D-1

Federal Reserve Bank of Cleveland

accepting of price increases in the past few months,

partly because they were seeing cost increases everywhere and had few alternatives. Contacts expected price

pressures to remain elevated in the coming months as

they keep up with cost increases and, in some cases, as

they try to recover lost profit margins.

Nonresidential construction and real estate activity continued to increase, driven largely by the heightened

demand for industrial space. One contractor indicated

that demand for industrial space was so great that rental

prices for existing spaces have been increasing to rates

comparable to those for newly constructed spaces.

Contacts were optimistic that nonresidential construction

would increase further, though persistent supply chain

disruptions and labor shortages were expected to be

constraints.

Consumer Spending

Reports suggested that consumer spending softened

following the holidays. Retailers noted that spending was

strong in November and December, but the rapid spread

of the Omicron variant following the holidays weakened

sales. Restaurateurs reported that concerns about the

pandemic and poor weather conditions weakened dinein activity, although some restaurateurs said that the

impact of the new variant waned toward the end of the

January as case rates dropped. Auto dealers reported

limited sales despite generally elevated demand as tight

inventories and higher prices deterred buyers. Contacts

were optimistic that nonauto consumer spending on

goods and services would pick up in the coming weeks

as concerns about the Omicron variant abate, and multiple auto dealers expected sales to increase along with

inventory levels in coming months.

Financial Services

Overall, loan demand increased modestly. Contacts

reported growth in business lending, especially for commercial and industrial loans, and many bankers reported

strong loan pipelines. By contrast, demand from households for auto loans and residential mortgages was

stable or slightly down as limited inventories in both

markets dampened activity. Lenders said that delinquency rates for commercial and consumer loans remained

low and that core deposits increased. Looking ahead,

bankers expected business loan volumes to improve as

clients make capital investments.

Professional and Business Services

Manufacturing

Demand for professional and business services remained robust. Contacts noted that clients continued to

invest in software upgrades and that demand for cybersecurity services increased. Activity related to mergers

and acquisitions was strong, as was demand for human

resource services. Furthermore, increased infrastructure

investments by state and local governments lifted demand for engineering services. Contacts anticipated

demand would remain strong as businesses continue to

invest in technology improvements and as infrastructure

investments become more widespread.

Manufacturing orders increased slightly from already

high levels. Contacts noted that output was stifled by

shortages of raw materials and workers. Aerospace

equipment manufacturing continued to recover, but auto

suppliers said that carmakers purchased less than they

had expected because of shortages of microchips and

other parts. High staff turnover and rising wages prompted some firms to spend more on labor-saving technology. That, in addition to increased overtime hours and

alternative work arrangements (for example, having nonfloor staff step into hands-on roles) allowed some firms

to boost production. Most manufacturing contacts expected demand to increase in the coming months, although they expected supply chain disruptions to persist.

Freight

Freight volumes increased slightly from already high

levels amid strong demand for goods and large backlogs

at distribution facilities. Persistent shortages of drivers

and vehicle parts was a common complaint among contacts, who noted such shortages restricted their ability to

meet demand. One contact said that a third of the firm’s

drivers reduced their driving hours when awarded a

higher wage, thus driving fewer miles while earning the

same salary. Looking forward, contacts expected demand to remain strong and their ability to move freight to

remain constrained.

Real Estate and Construction

Housing demand remained strong despite rising home

prices. One homebuilder compared current housing

demand to a fever and noted that customers were buying houses at any price without pushback. An increasing

number of homebuilders noted that demand has been so

strong that they no longer have the capacity to build

spec homes. In addition, supply chain difficulties impeded construction activity. Contacts anticipated that housing demand would remain robust in the near term, although supply chain challenges would continue to constrain construction.

For more information about District economic conditions visit:

www.clevelandfed.org/en/region/regional‐analysis

D-2

Federal Reserve Bank of

Richmond

The Beige Book ■ February 2022

Summary of Economic Activity

The regional economy grew moderately in recent weeks, but growth continued to be constrained by supply chain and

transportation issues and labor shortages. Manufacturers reported a modest increase in new orders, but shipments

declined slightly as production was impacted by weather, long lead times for inputs, truck and container shortages, and

an increase in employee absenteeism due in part to the Omicron variant. Ports and trucking companies continued to

report strong volumes but challenges meeting it because of shortages of truck drivers and transportation equipment.

Retailers saw moderate growth in sales and foot traffic in recent weeks. Travel and tourism, on the other hand, declined

slightly due to winter weather and the recent surge in covid cases. Residential real estate markets were little changed as

demand remained strong but low inventory levels persisted. Meanwhile, commercial real estate activity picked up moderately. Industrial real estate remained the hottest sector, but sales and leasing of multifamily and office properties grew

strongly this period. Bankers reported rising loan demand across all loan types, although auto and mortgage lending

was constrained by the inventory shortages in those markets. Nonfinancial firms reported a modest increase in revenues but continued to struggle hiring enough workers to meet demand. Employment grew moderately, overall, but a

large number of firms reported shortages of workers. In response, firms increased wages and looked to benefits and

flexible arrangements to attract and retain talent. Price growth remained elevated in recent weeks.

increases, and if costs continued to rise they would have

to find a way to absorb them.

Labor Markets

Employment continued to increase at a moderate rate in

the Fifth District. Demand for labor remained strong and,

for many firms, far exceeded the supply of available

workers. This led firms to increase wages moderately

and to offer additional benefits, including flexible working

arrangements, to attract workers and to retain existing

staff. Some firms noted that even after doing so, they lost

employees to companies who were willing to pay higher

wages or were fully remote. Some employers were willing to loosen requirements on education and experience

in favor of on-the-job training to fill open positions. One

employer added that advancements in technology allowed them to hire workers without a four-year degree in

computer science.

Manufacturing

Fifth District manufacturers reported a modest increase

in new orders since our previous report. Firms reported a

slight decline in shipments, however, which was attributed to winter weather, workforce challenges, availability of

shipping containers and trucks, and delays in receiving

inputs from vendors. Some of the workforce challenges

were due to employees testing positive for covid during

the surge of cases from the Omicron variant, while some

were simply due to not having enough workers to meet

an elevated level of demand. Although most manufacturers reported growth in new orders, one firm said that

new orders slowed for them because some of their customers’ inventory levels were back up to normal.

Prices

Price growth slowed slightly in recent weeks but remained at an elevated rate. According to our surveys,

prices received by nonmanufacturing firms were about

five percent higher than last year, which was down slightly compared to the peak rate of growth reported in December of 2020. The majority of firms indicated that they

were raising prices in response to rising costs of both

labor and non-labor inputs, including shipping and energy. A small number of firms, however, were concerned

that customers may not be willing to accept further price

Ports and Transportation

Fifth District ports saw strong growth in import volumes

with the terminals at capacity and containers sitting at

the ports for extended times. These delays were caused

by shortages in inland transportation and a scarcity of

warehouse space. Loaded exports were down moderately with the exception of forest products. Spot shipping

rates remained elevated, but declined slightly from their

2021 peak. Meanwhile, contract negotiations by shipping

E-1

Federal Reserve Bank of Richmond

lines with cargo shippers for one-year and multiyear

contracts signaled that rates were expected to be higher

than in the past. There also were reports of increased air

freight due to higher costs and cargo delays with oceangoing shipping.

shortages, and supply chain disruptions. Investor purchases have been robust with high demand especially

for multifamily properties and office building with stabilized occupancy. The industrial segment remained very

strong with low vacancy rates, escalating rental rates,

increasing sale prices, and continued new construction.

Multifamily rental rates have risen rapidly this period.

Retail leasing strengthened, leading to falling vacancy

rates. Land sales were extremely active and prices increased across all property types. Office leasing activity

improved, especially for Class A space with lots of

amenities, as tenants are looking to “right-size” due to an

increasing hybrid workforce.

Trucking companies in the Fifth District reported strong

growth since our last report, leading to tight capacity and

a continued shortage of drivers. Longer lead times and

higher prices for both new truck tractors and trailers led

to companies relying more heavily on prolonged use of

older equipment, but this has been hampered by delays

in receiving repair parts. Trucking firms indicated that

they increased shipping rates in response to higher fuel

costs, wages, and equipment prices.

Banking and Finance

Most respondents reported that overall loan demand is

beginning to increase from the last part of 2021. These

increases are being seen across all loan types, including

commercial real estate and business loans. One respondent attributed this to the anticipation of higher rates

and the winding down of the Omicron variant. Auto and

mortgage lending was still being constrained from a lack

of inventory. Deposit levels increased, but at a slower

pace than previously reported. Credit quality continued

to be excellent, but some respondents noted a slight

uptick in delinquencies mainly in their consumer portfolio.

Retail, Travel, and Tourism

Fifth District retailers reported moderate growth in demand and revenues in recent weeks. Shopper traffic

increased and many stores were able to pass on the

higher costs of goods as well as increased labor costs to

customers. Auto dealers stated that profitability remained at historically high levels, but that the inventory

of new cars continued to be extremely low. Several

respondents noted that the Omicron variant led to challenges with employee absenteeism and supply chain

disruptions.

Travel and tourism decreased slightly due to weather as

well as concerns over the Omicron variant. Contacts

noted that group and business traveled remained soft,

with passenger counts at airports down since the last

report. Tour operators stated that the latest Covid variant caused cancellations of booked business along with

large reductions of new bookings. However, visitation

was strong at outdoor venues and ski resorts. Prices at

hotels were up slightly and average daily room rates

have returned to 2019 levels in many places in the Fifth

District. Restaurants experienced good demand but

many had to limit service because of a lack of staffing.

Nonfinancial Services

Nonfinancial services firms saw a modest increase in

revenues in recent weeks and several businesses said

that demand was starting to pick up. One professional

service firm said that being able to attend conferences

again was helping boost business. Many firms continued

to struggle with employee turnover and hiring difficulties,

making it challenging to meet demand. One contact also

noted that turnover among project managers at their

clients’ businesses caused disruptions to projects flows.■

Real Estate and Construction

Demand for Fifth District homes remained strong since

our last report. Low inventory levels persisted and home

prices continued to rise; it continued to be a sellers’

market and very competitive for buyers. Construction

costs increased and shortages of skilled trade labor and

materials slowed new residential construction. Buyers

were not having any difficulty obtaining mortgages and

appraisal have not been an issue because of strong

comparable sales.

Commercial real estate activity expanded moderately in

recent weeks; however, firms continued to face challenges from higher construction costs, skilled trade labor

For more information about District economic conditions visit:

www.richmondfed.org/research/data_analysis

E-2

Federal Reserve Bank of

Atlanta

The Beige Book ■ February 2022

Summary of Economic Activity

Economic activity in the Sixth District expanded at a moderate pace, on net, from January through mid-February. Demand for workers remained strong, and labor market tightness endured. Upward pressure on wages was widespread,

especially for lower-paid positions and skilled trades. Nonlabor costs grew, and firms’ pricing power increased. Retail

sales were healthy, but auto sales remained constrained by lack of supply. Tourism activity softened somewhat due to

the surge in the Omicron variant, though advance bookings were strong. Demand for housing remained robust, but

sales were constrained by low inventory levels. Activity in commercial real estate was mixed. Manufacturing activity was

strong. Conditions at financial institutions were stable, though residential mortgage delinquencies rose somewhat.

Labor Markets

Demand for workers remained strong over the reporting

period and tightness in the supply of labor persisted.

However, many contacts indicated labor market conditions have eased modestly since the beginning of the

year. Poaching of employees lessened somewhat. Most

firms continued to hire to fill vacant positions while others

looked to grow headcounts to meet strong business

demand. A high-end restaurant noted moving to a

scheduling system that utilizes employees’ preferences

for work, allowing them to “shift surf” among several

restaurants to accommodate personal schedules and

maximize income, which ultimately resulted in staffing

shortages at some establishments. Reports also indicated a significant shortage of skilled technicians resulting

in long waits for service calls and repairs to commercial

equipment and vehicles. Several firms noted that while

there was a spike in absenteeism related to the Omicron

variant surge and more employees were impacted, the

new variant moved through more quickly than earlier

variants.

of available labor, as the driving factor behind rising

costs. The concerns over pricing power noted in the

previous report eased, with most firms seeing higher

margins from price increases with little to no impact on

demand. Most contacts expect costs to remain elevated

through at least the end of the year. The Atlanta Fed’s

Business Inflation Expectations survey showed yearover-year unit cost growth increased slightly to 3.7 percent, on average, in January. Firms' year-ahead inflation

expectations remain unchanged at 3.4 percent, on average.

Consumer Spending and Tourism

District retailers reported little change from the previous

report. However, with the expiration of the advance on

the child tax credit and the anticipation of smaller tax

refunds, some softening in activity is expected over the

next few months. Demand for vehicles remained strong,

limited only by availability. Some contacts reported that

trucks and trailers were pre-sold and just pending delivery.

Although upward pressure on wages was widely reported, particularly at the lower end of the pay scale and

among skilled trades, bonuses were used to attract and

retain employees as firms tried to hold the line on wage

increases. Some contacts noted that positions which

offered flexibility were easier to fill. Wages are expected

to continue to rise this year, but there is a great deal of

uncertainty around the pace of growth.

Travel and hospitality contacts reported a slight softening

in activity during the first few weeks of January due to

the Omicron variant surge. Advance bookings for leisure

travel were reported to be strong through the second

quarter. While business travel and conventions are expected to improve during the first half of 2022, this segment remains well below pre-pandemic levels.

Prices

Construction and Real Estate

District contacts noted increasing input costs over the

reporting period, with considerable growth in the cost of

freight, raw materials, and labor. Many contacts continued to describe supply chain issues, particularly a dearth

Demand for housing continued to outpace supply in the

District. Many markets remained attractive to buyers

F-1

Federal Reserve Bank of Atlanta

mercial and industrial Paycheck Protection Program

loans. Credit cards and other consumer loans experienced strong growth. Deposits slowed and institutions

increased borrowings to provide additional liquidity.

Institutions experienced some increases in delinquencies, particularly in the residential portfolio, but overall

delinquencies remained below historical levels.

relocating from more expensive regions of the country,

such as the Northeast and West Coast. Rising interest

rates motivated many buyers to purchase or refinance

before rates moved higher, leading to increased mortgage originations. Credit quality among borrowers remained healthy, with lenders indicating stronger demand

and looser standards for non-qualified and jumbo mortgages. Low inventory levels suppressed sales and

pushed home prices higher throughout the District, putting further downward pressure on affordability. Homebuilder contacts indicated steady demand from nonprimary buyers (i.e., investors, second home buyers) as

well as continued cost pressures on materials and labor.

Energy

Demand for energy products strengthened since the

previous report, resulting in increased activity across

energy sectors. Oil and gas production picked up across

the region and contacts indicated that liquefied natural

gas (LNG) export projects had returned after pandemicdriven delays. At the same time, domestic demand for

LNG soared as a result of extremely cold weather in

parts of the U.S. Utilities contacts reported that demand

for power was up across customer segments. Energy

industry contacts continued to describe efforts to develop

lower carbon energy feedstocks and products, such as

biofuels.

Commercial real estate (CRE) activity was mixed. Conditions in the industrial real estate sector remained robust.

The office sector improved modestly as more employers

reopened, but contacts indicated that elevated levels of

sublease space could hinder market rent growth until

absorbed. After a robust year, multifamily activity slowed

due to seasonality; however, occupancies remained at

healthy levels. Contacts continued to report robust competition among CRE lenders; however, some reported a

modest tightening of underwriting standards. Smaller

banks and non-bank lenders have been identified by

market contacts as the more aggressive of CRE lenders.

Agriculture

Agricultural conditions remained mixed. The southern

parts of Louisiana and Mississippi experienced moderately dry conditions, while the rest of the District experienced mostly normal conditions. The January 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. However, while

damages are still being assessed, it was reported that

recent cold snaps in Florida are expected to have a

material adverse impact on citrus crop yields. The USDA

reported year-over-year prices paid to farmers in December and on a month-over-month basis, were up for corn,

cotton, rice, soybeans, cattle, broilers, eggs, and milk. ■

Manufacturing

District manufacturers experienced continued strong

demand and healthy pipelines over the reporting period,

with several noting historically high sales levels, profitability, and improved margins. Several contacts reported

ongoing delays in the procurement of components and

spare parts, particularly from China. The outlook for

manufacturers, while optimistic about demand, was

somewhat to the downside amidst growing geopolitical

risks, continued supply chain constraints, and inflation.

Transportation

Transportation activity in the District strengthened, on

balance, since the previous report. Demand for trucking

services remained strong amid persistent shortages of

drivers, trailers, and chassis. In some markets, warehousing was reported to be at capacity. Sea ports, most

notably in Florida, experienced growing container volumes and new cargo vessel business as shipping lines

shifted to east coast ports to avoid congestion on the

west coast. The outlook among transportation contacts

remains positive, with most expecting continued strong

demand through the first half of 2022.

Banking and Finance

Conditions at District financial institutions were stable

over the reporting period. Loan growth across most

portfolios was obscured by the number of forgiven com-

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 ■ February 2022

Summary of Economic Activity

Economic activity in the Seventh District increased moderately in January and early February, 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 increased strongly; consumer spending, business spending, and

manufacturing were up modestly; and construction and real estate grew slightly. Wages and prices rose rapidly, while

financial conditions deteriorated some. Expectations for 2022 agricultural income moved up.

a strong pace over the next 12 months. There were large

increases in producer prices, driven by pass-through of

higher costs for materials, labor, and transportation.

However, some contacts in manufacturing said that

pricing pressures appeared to have peaked, highlighting

an easing of steel and overseas shipping costs. Consumer prices generally moved up robustly. Sources of

higher prices included solid demand, limited inventories,

increased costs, and a continued ability to pass cost

increases on to customers.

Labor Markets

Employment increased at a strong pace over the reporting period, and contacts expected moderate growth over

the next 12 months. Contacts across sectors reported

persistent difficulty in finding workers at all skill levels.

That said, one contact indicated it was easier to find

workers now than in the fourth quarter of last year. A

lack of labor was preventing a number of contacts from

producing enough to meet strong demand. In addition, a

construction contact reported that limited availability of

higher skilled workers meant they were relying more on

lower skilled workers, reducing productivity. Contacts

also noted that the spread of the Omicron variant had

pushed up absenteeism and slowed production; however, workers were typically recovering faster and returning

to work sooner than in previous waves. 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. In higher education, one contact noted that

institutional policies were limiting wage offers and making it very difficult to hire. To retain workers, many employers increased the frequency of pay raises or profit

sharing.

Consumer Spending

Consumer spending increased modestly over the reporting period from already high levels. Nonauto retail sales

were up some, and contacts indicated that sales exceeded expectations given the Omicron variant’s negative

impact on foot traffic. Sales of office furniture and building materials increased further, while lawn and garden

and appliance spending remained elevated. Contacts

noted a shift from eating out to eating at home, as grocery sales moved up and food service demand declined.

There was a modest decrease in sales in the home

furnishings and electronics sectors. Seasonally adjusted

light vehicle sales were up, though sales continued to be

constrained by low inventory levels. Dealer profit margins remained strong, reflecting higher vehicle prices.

Leisure and hospitality spending was unchanged on

balance.

Prices

Overall, prices rose rapidly in January and early February, and contacts expected price increases to continue at

G-1

Federal Reserve Bank of Chicago

Business Spending

steady at a high level, and tight inventories pushed up

prices. Steel production ticked up amidst growth in demand from energy and construction customers. Steel

availability increased due to large volumes of imports

and rising domestic capacity utilization. Demand for

building materials was modestly higher, supported by

solid orders for commercial and residential construction.

Business spending increased modestly in January and

early February. Retail inventories remained low in many

sectors due to domestic and international supply chain

challenges, and several contacts said they expected the

issues to persist into the second half of 2022. Stocks of

apparel and food and beverages were especially under

pressure. Manufacturing inventories moved up some,

though contacts continued to report shortages of a wide

range of inputs. One contact indicated that materials

availability was more predictable now than in the second

half of 2021. Demand for transportation services was

little changed as the industry continued to operate at full

capacity. Capital expenditures increased moderately,

with contacts highlighting technological upgrades (such

as new automation equipment) and facility expansions.

Lead times for delivery of capital equipment continued to

be elevated. Residential and commercial energy consumption edged up. There was a small increase in industrial energy consumption driven by greater utilization

by manufacturers.

Banking and Finance

Financial conditions deteriorated some over the reporting

period. Participants in the equity and bond markets

reported an increase in volatility and net declines in

asset values. Business loan demand was flat, and contacts continued to report strong competition for deals.

Business loan quality was high and improved slightly,

while business loan standards reportedly loosened a bit.

In consumer markets, loan demand was unchanged

overall. Volumes were largely flat across sectors, except

for home mortgage refinancing, which declined. One

contact noted that while the quantity of auto loans declined, loan values were up enough to result in an increase in the dollar value of auto lending. Consumer

loan quality and standards were unchanged.

Construction and Real Estate

Construction and real estate activity increased slightly

over the reporting period. Labor shortages and long lead

times for materials persisted for both residential and

nonresidential builders, stretching project completion

times. Residential construction activity increased slightly,

and backlogs continued to build. One homebuilder said

strong demand made it feel like the spring building season had already started. A nonprofit builder noted that

American Rescue Plan money designated for affordable

housing was being released more slowly than desired.

Residential real estate activity was flat, held back by

limited supply. Home prices ticked up, while rents were

up moderately. Nonresidential construction activity increased slightly, with one contact highlighting greater

demand for office buildout projects. Pricing increased

slightly from already high levels. Commercial real estate

activity increased slightly, buoyed by robust demand for

industrial and multifamily buildings. Retail leasing also

picked up. Commercial rents decreased slightly. Commercial prices and vacancy rates were unchanged, while

sublease space availability increased moderately.

Agriculture

Rising prices for agricultural products buoyed expectations for farm income in 2022, though input costs rose as

well. Corn and soybean prices continued to move up, but

prices for energy, fertilizers, and herbicides also rose,

and concerns deepened about their availability at planting time given supply chain issues. One contact pointed

out a planting decision dilemma: seeds that are more

readily available do best when used with herbicides that

are in short supply. Supply issues were also delaying

some new tractor deliveries, possibly past spring planting. Prices for cattle, hogs, eggs, and milk were up

again. Farm finances kept improving, and demand for

agricultural loans was lower than a year ago. Farmland

prices increased more in 2021 than they had in nearly a

decade, with continued growth expected in early 2022. ■

Manufacturing

Manufacturing production increased modestly in January

and early February. Despite strong demand for the majority of manufacturers, capacity constraints due to challenges in securing inputs (particularly labor) limited production gains. Auto output dropped slightly, as assemblers and suppliers continued to face shortages of microchips and other materials. Demand for heavy trucks was

For more information about District economic conditions visit:

chicagofed.org/cfsbc

G-2

Federal Reserve Bank of

St. Louis

The Beige Book ■ February 2022

Summary of Economic Activity

Economic conditions have remained unchanged since our previous report. Employers reported robust wage increases

and continued difficulties finding workers. Price increases were greater than expected across several industries, with

supply chain issues and strong demand contributing to ongoing price pressures. Firms reported improved ability to pass

on price increases and anticipate continued increases in the short term, although retailers reported signs of softening

demand among lower income households. Winter weather, labor shortages, and Omicron COVID-19 disruptions led to

decreased activity in the transportation and hospitality sectors. The real estate sector remained strong; although supply

shortages continue to affect construction, demand for commercial and residential space is high throughout the District.

has been an impediment to raising prices and that they

had to enlist corporate employees to change price tags.

Retailers also reported plans to utilize electronic price

tags to reduce the labor needed to change prices. A

furniture retail contact reported that a several-month lag

on deliveries will result in elevated retail prices this year.

An auto sales contact expects prices to fall as inventories build up.

Labor Markets

Employment has increased slightly since our previous

report; on net, 5% of contacts reported increasing employment since last year. Firms continued to report a

shortage of workers, with some contacts investing in

labor saving automation, structural changes, or service

reductions. Other contacts emphasized changes in their

hiring practices; one industrial contractor, unable to find

qualified labor, reached out to a local school district

about an apprenticeship program.

Consumer Spending

District general retailers, auto dealers, and hospitality

contacts reported mixed business activity since our

previous report and a mixed outlook for the immediate

future. District retailers have noted that their sales are

high in part because of a steady demand for higherpriced items. An Arkansas retailer noted that their sales

are still being influenced by supply chain issues, as they

recently received a shipment that was due in April 2021.

An auto dealer in Louisville reported their manufacturer

was unable to supply anticipated new vehicle stock and

as a result their used vehicle trade-ins suffered. Restaurants in downtown Memphis are still dealing with the

effects of the pandemic as of late January since convention business and travel have yet to recover.

Wages have grown robustly since our previous report.

On net, 65% of contacts reported increasing wages.

Small firms continue to struggle to match ever-growing

market wages. Wage increases at firms with worker

shortages were compounded by increased overtime; one

manufacturer estimated a 5% to 20% increase in labor

costs from overtime and hazard pay.

Prices

Prices have increased moderately since our previous

report. A greater share of contacts than usual reported

that price increases have been higher than expected.

The majority of contacts noted the ability to increase

prices charged to consumers in the near future. Several

retail contacts indicated they were behind on raising

prices to consumers. One retail contact reported that a

shortage of in-store staff to physically change price tags

Manufacturing

Manufacturing activity has slightly increased since our

previous report. Survey-based indices suggest that

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Federal Reserve Bank of St. Louis

production, capacity utilization, and new orders have all

slightly increased. Firms in Arkansas and Missouri reported slight reductions in production and slight upticks

in new orders. The Omicron COVID-19 variant applied

pressure to manufacturing labor, both in terms of worker

hiring and absenteeism. The easing of travel restrictions

has increased the availability of raw materials from Europe, relieving some supply chain issues. Firms continue

to invest in process automation to address the systemic

workforce shortage, with one manufacturing company in

Arkansas tripling their number of robotic welders. On

average, firms reported they expect slight increases in

production, capacity utilization, and new orders in the

third quarter, and they remain optimistic about the level

of production.

demand is slightly higher than in our previous report.

Input costs, delivery times, project backlogs, and project

completion times have all increased in the past month.

Contacts reported that the most important factor impeding business growth during the next few months is the

labor shortage.

Banking and Finance

Banking conditions have improved slightly since our

previous report. District banks reported an increase in

loan demand since the previous survey period. Commercial, industrial, and auto loans increased moderately,

while demand for credit card lending decreased. Liquidity

remained elevated due to pandemic-related government

assistance, but bankers reported difficulties in finding

investments to deploy excess funds. Overall delinquency

rates decreased modestly, and a contact reported asset

quality metrics to be historically strong.

Nonfinancial Services

Activity in the nonfinancial services sector has decreased since our previous report. Airport passenger

traffic decreased slightly month-over-month, though it

remains well above levels at this point last year. Several

contacts attributed below-expected sales at this point in

the quarter to the Omicron COVID-19 variant. A

healthcare contact reported that the combination of

COVID-19 and winter weather led to a decline in patient

volumes of over 30%. Despite this, hospitals continue to

deal with significant labor shortages. A transportation

contact mentioned that a lack of qualified labor—

specifically, truck drivers—has hindered business. A

technology contact reported that rising interest rates are

leading to purchasing hesitancy among customers.

Agriculture and Natural Resources

District agriculture conditions have improved modestly

since our previous report. The number of acres of winter

wheat planted in the District this season have increased

10% over the same period last year. This increase primarily came from Illinois, Kentucky, and Missouri, which

saw their acreage rise an average of 20%. While contacts remain optimistic about 2022, there is continued

concern about the increased costs of inputs such as

fertilizer, pesticides, and machinery. Of particular concern is corn production, which uses significantly more

fertilizer than other crops.

Natural resource extraction conditions increased modestly from November to December, with seasonally

adjusted coal production rising 10.6%. December production decreased slightly, by 3.1% compared with the

previous year. ■

Real Estate and Construction

The residential real estate market has remained strong

since our previous report. Home prices remain high

relative to incomes and one contact believes many firsttime buyers will be priced out this year. Inventory has

remained extremely low, and contacts expect it to remain

low through at least the next quarter. Apartment rental

rates also remained high relative to incomes. One contact stated that the high demand for rentals has increased the rate per square foot substantially. The commercial real estate market has also remained strong,

with very high demand for industrial real estate in particular. Demand for retail space has increased since our

previous report. One contact believes institutional capital

is currently shifting more toward retail spaces, due to

continued high demand and diminishing returns in the

industrial and residential sectors. Many contacts remain

concerned about the uncertainty surrounding potential

interest rate increases.

Demand in the construction market remains strong despite supply chain disruptions. Residential construction

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Summary of Economic Activity

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Labor Markets

Prices

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Worker Experience

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Consumer Spending

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Manufacturing

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Agriculture, Energy, and Natural Resources

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Professional Services

Minority- and Women-Owned Business Enterprises

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Construction and Real Estate

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Federal Reserve Bank of

Kansas City

The Beige Book ■ February 2022

Summary of Economic Activity

The Tenth District economy expanded at a modest pace in the first two months of the year. Although the surge in COVID19 cases associated with the Omicron variant slowed spending and hours worked in the leisure and hospitality sector,

activity rebounded quickly as the surge diminished and grew steadily across other service and manufacturing sectors.

Rising commodity prices supported farm incomes and growth in energy activities. Contacts reported that demand for

commercial real estate construction grew, bringing project bookings to their highest levels in several years. Supply chain

disruptions adversely affected most businesses, leading many retailers and manufacturers to adopt more costly sourcing

strategies. Wages grew at a robust pace across industries and occupations. Although wages paid in lower-skill jobs increased, losses in hours worked associated with the pandemic slowed income growth for many low-income households

near the start of the year. Contacts reported broad-based cost pressures, which they expect will persist through the coming year. Prices grew at a robust rate but most contacts indicated that they did not fully offset rising input costs.

Labor Markets

Prices

Total hiring grew at a modest pace near the start of the

year, constrained by labor shortages. Several businesses reported job openings in excess of twenty percent of

their current workforce, with more jobs open than are

actually posted. Employment growth at retail businesses

offset temporary shortfalls in hiring at hotels and restaurants, resulting in greater services employment overall.

Total hours worked in leisure and hospitality declined

sharply in early January, but rebounded in recent weeks.

Manufacturing employment grew at a moderate pace.

Prices continued to increase at a robust pace. Input

costs also grew robustly and generally outpaced growth

in selling prices. Most businesses reported being able to

pass only a small portion of increased costs to their

customers, but some contacts indicated their ability to

fully pass-through cost pressures. Nearly all firms reported price pressures were broad-based, citing increases in

costs for materials, labor, energy, financing, real estate,

and shipping, with expectations for additional increases

in costs over the medium term.

Wage growth remained robust and broad-based in recent weeks. Many low-wage workers reported wage

gains obtained by job switching or union bargaining

outcomes, but also noted inconsistent incomes due to

lost working hours associated with school closures or

family illness in early January. Contacts noted they

continued to increase non-wage benefits offered to

workers, but some reported that these benefits did not

attract a larger number of applicants. In particular, applicants for entry-level or low-wage jobs favored higher

wages over additional benefits. Most businesses expect

wages to continue growing over the medium term.

Consumer Spending

Overall consumer spending slowed slightly at the beginning of the year amid the latest surge in the number of

COVID-19 cases. However, expectations for growth in

spending on services over the next six months remained

elevated and contacts noted a quick rebound in activity

at restaurants and hotels in recent weeks. Some contacts at retailers expressed concerns that consumers

had already purchased several years’ worth of goods,

particularly those associated with leisure activities. As a

result, many goods retailers reported they are “hedging

their bets” with regard to ordering inventory for the coming year, even though consumer demand remained high.

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Federal Reserve Bank of Kansas City

Manufacturing and Other Business Activity

Community and Regional Banking

Growth in the manufacturing sector slowed to a modest

pace, with total levels of activity near historic highs. The

leisure and hospitality sector remained sensitive to developments related to the pandemic, but other business

activity expanded throughout recent weeks. Expectations

for growth remained elevated broadly. Nearly all contacts

reported no expected changes in business plans related

to the pandemic over the medium term.

Loan demand remained stable across a variety of sectors, although some contacts highlighted slight softening

in demand for C&I and residential mortgage loans in

recent weeks. Credit conditions remained benign with

low levels of past due and non-performing loans. Contacts expected credit quality to remain sound over the

near term, citing commodity price increases and improvement in pandemic-sensitive sectors as key drivers. Deposit levels also remained stable, with slight

growth noted in demand deposit accounts at several

institutions as commercial balances were bolstered by

strong customer earnings. Contacts were attentive to the

outlook for inflation and prevailing difficulties with staffing

at their organizations.

Contacts across many sectors, geographies and sizes

reported changes to their procurement plans for the

coming year to include a broader network of suppliers, in

an attempt to shorten or stabilize delivery times. Yet,

most contacts expect that costs of sourcing from new

suppliers will remain elevated. Some indicated that the

new relationships with suppliers, or lack thereof, would

increase procurement costs over the medium term.

Others indicated procurement costs would remain elevated because of the need to double-order inventory,

choosing to take on risks of having too much inventory to

ensure delivery of needed materials.

Energy

Tenth District energy activity expanded modestly at the

start of the year. The number of active rigs continued to

increase in Oklahoma and total oil & gas production

grew as crude oil prices reached a seven-year high.

Natural gas prices also rose; however, future price expectations for natural gas remained more moderate.

Higher natural gas prices also led to growth in coal mining activity in Wyoming as electricity utilities substituted

toward the less costly fuel. Demand for coal mining

equipment and maintenance was expected to remain

elevated over the next eighteen months. Energy employment across District states continued to lag prepandemic trends but increased slightly from a year ago.

Labor costs increased moderately, as many firms continued to report higher wages and benefits for workers.

The outlook for capital expenditures from business contacts was mixed across sectors. Planned investments

among aerospace and other transportation businesses

increased recently, and also at food manufacturing businesses. Many of these capital expenditures are aimed at

automation to mitigate the effects of labor shortages. In

healthcare, planned capital expenditures were suppressed and aimed at maintaining capacity, rather than

expanding it. Contacts in hospitality sectors reported

growth in plans to renovate and upgrade spaces to attract customers. In addition to capital expenditures,

several contacts noted that spending on marketing and

advertising is growing amid healthy consumer demand.

Agriculture

Prices of most major commodities in the region increased modestly through early February from already

high levels, continuing to support farm incomes. The

prices of wheat, cotton and hogs increased modestly

from the previous month while corn, soybean and cattle

prices increased more sharply. Despite growing concerns about supply chain complications limiting shipping

activity, U.S. agricultural exports remained strong and

supported demand. Rising input costs have put some

downward pressure on profitability for producers, but

broad strength in the farm economy continued to support

agricultural credit conditions, and farm finances were

further bolstered by sharp increases in farmland values.■

Real Estate and Construction

Demand for new construction in commercial real estate

grew robustly in January and February. Most contractors

reported the level of projects booked currently is at, or

above, pre-pandemic levels. However, contacts reported

that difficulties in sourcing materials are leading to costly

redesigns or delays for their customers. As a result,

recent contracts have eschewed commitments on delivery dates and committed only to a price, unable to guarantee both. Moreover, contacts in both the public and

private sector reported difficulty in soliciting bids from

contractors for projects, eroding their bargaining power

that would otherwise mitigate price pressures.

For more information about District economic conditions visit:

www.KansasCityFed.org/research/regional-research

J-2

Federal Reserve Bank of

Dallas

The Beige Book ■ February 2022

Summary of Economic Activity

Expansion in the Eleventh District economy moderated, with the COVID-19 surge exacerbating labor and supply-chain

shortages and disrupting demand in certain sectors. Growth in manufacturing and nonfinancial services continued but at

a slower pace, and retail sales declined slightly. Loan demand growth decreased a bit amid rising interest rates. Home

sales remained elevated. The energy sector saw further expansion, while worsened drought hampered agricultural

conditions. Employment rose fairly robustly, and wage growth pushed to new highs due to widespread labor shortages.

Supply-chain issues continued to drive up costs, and prices rose at a rapid clip. Outlooks remained positive, though

uncertainty surged and businesses expressed concern that labor market tightness and supply-chain disruptions will not

soon be resolved.

Labor Markets

Prices

Employment growth remained robust. Job gains were

widespread across sectors and strongest in manufacturing, banking, real estate, and health care. Acute worker

shortages persisted, however, and many contacts said

the recent COVID-19 surge brought on new or worsened

hiring difficulty. Contacts cited a lack of applicants as the

primary hiring impediment, with significantly more saying

the availability of applicants worsened than improved in

January. Increased absenteeism was also a major problem over the reporting period, as workers called out sick

due in large part to the Omicron surge. These absences

resulted in significant widespread disruption to business

operations.

Input and selling price increases remained at or near

historical highs. Contacts continued to cite supply-chain

issues as the primary driver of rising costs. Construction

contacts reported sizable increases in the price of concrete, steel, PVC, drywall, and lumber. A machinery

manufacturer reported raw material increases of 10 to 20

percent each month. Transportation costs continued to

surge, driven by a combination of supply-side constraints

and higher fuel prices. A few contacts said broad-based

price increases have led to a pullback in consumer demand and business capital spending.

Manufacturing

Expansion in the Texas manufacturing sector continued

but at a slower clip in January and February. Seventy

percent of manufacturers noted a negative impact from

the COVID-19 surge—namely increased employee

absenteeism and new or worsened supply-chain disruptions—according to a Dallas Fed survey of nearly 100

Texas manufacturing firms. Demand and output growth

remained robust, though, led by nondurable goods like

food and chemicals. Strength was also seen in construction materials manufacturing, while weakness was seen

in high-tech manufacturing. Outlooks improved modestly,

though uncertainty escalated amid the Omicron surge.

Wage growth pushed to new highs over the reporting

period, driven largely by labor shortages. Manufacturers

noted persistent difficulties in retaining employees, saying they were having to increase wages significantly to

try to convince workers to stay. This sentiment was

echoed in the service sector as well, with some firms

being forced to give out significant pay increases or lose

key employees. A bank raised their minimum wage to

$18 per hour, slightly mitigating retention issues.

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Federal Reserve Bank of Dallas

Retail Sales

was on a stable footing, and industrial construction and

demand remained elevated.

A marked decrease in auto sales prompted a slight

reduction in overall retail sales over the past six weeks.

Auto dealers cited low inventories and pandemic-related

disruptions to both demand and employee availability as

primary sales restraints. Sales among wholesalers increased slightly, though contacts noted supply-chain

issues remained a strong headwind. While uncertainty

surged, outlooks were largely unchanged and most

retailers still expect to see higher sales six months from

now.

Financial Services

Loan demand increased over the past six weeks, as did

loan volumes, though both rose at a slightly slower pace

than in the prior period. Loan volume increases spanned

lending types, led by commercial real estate. Nonperforming loans continued to decrease, and credit standards and terms tightened slightly. Loan pricing increased

for the first time since mid-2019. Contacts expressed

concerns about the effects of interest rate increases,

inflation and staffing shortages. However, general business activity continued to improve, and outlooks for loan

demand and general business activity six months from

now remain optimistic.

Nonfinancial Services

Growth in Texas service-sector activity slowed sharply in

January but rebounded in February. Seventy percent of

firms noted a negative impact from the COVID-19 surge,

and the biggest drag on January growth came from the

leisure and hospitality sector, where revenues declined

notably. Hotels reported cancellations and decreased

business travel due to the Omicron variant, and restaurants experienced less business and severe worker

shortages with employees out sick. Transportation services firms saw flat activity overall. An airport said passenger travel declined over the past six weeks due to the

effect of Omicron, with many passengers cancelling or

rescheduling trips for later in the year, though bookings

have recently begun returning. A major Texas seaport

posted record-high tonnage numbers in 2021, and developments in early 2022—including new routes and equipment—are expected to spur continued growth. A bright

spot in the service sector was staffing services, which

saw a pickup in revenues and broad-based, robust demand. Overall, pandemic-related weakness in the nonfinancial services sector was largely transitory, as revenue growth increased markedly in February.

Energy

Oilfield activity rose over the past six weeks, with a notable increase in the Eleventh District rig count. Lead times

for machinery orders were stabilizing at high levels, but

delays are expected to continue throughout the year.

Industry sentiment improved with high oil prices, strong

demand from consumers, and increasing confidence that

global supplies will struggle to keep pace with demand

for the remainder of the year. As such, firms revised up

their expectations for oilfield activity in 2022.

Agriculture

Drought conditions worsened further, with severe

drought expanding in much of the district. Agricultural

commodity prices rose across the board over the reporting period, though input costs rose just as much. Producers fear profits will get squeezed with such high costs;

good yields will be important for their financial position

this year. On the cattle side, prices rose and consumer

demand for beef remained solid. An annual inventory

report from the U.S. Department of Agriculture showed

fewer cattle in Texas; tighter supplies should buoy beef

prices this year. ■

Outlooks held steady in January and improved in February. Headwinds include uncertainty surrounding the path

of the pandemic, supply-chain stresses, and inflation.

Construction and Real Estate

Home sales continued to be solid, and contacts said that

rising mortgage rates have not yet impacted demand.

Builders reported capping sales and/or holding off putting homes on the market until they had more clarity

regarding their costs. Prices continued to trend upward,

in part due to climbing material costs, particularly lumber.

Operational challenges were ongoing, preventing builders from being able to finish as many units as planned.

Outlooks were cautiously optimistic, with very low supply

relative to demand.

Apartment leasing moderated slightly. On the commercial side, office leasing was picking up, the retail market

For more information about District economic conditions visit:

www.dallasfed.org/research/texas

K-2

Federal Reserve Bank of

San Francisco

The Beige Book ■ February 2022

Summary of Economic Activity

Economic activity in the Twelfth District strengthened moderately during the reporting period of January through midFebruary. Employment grew further while overall labor market conditions remained tight. Wages and price levels continued to climb notably, driven by materials and labor shortages. Sales of retail goods increased solidly, while conditions in

consumer and business services picked up following a decrease in new COVID cases related to the Omicron variant.

Conditions in the agriculture and resource-related industries remained unchanged on balance, whereas the manufacturing sector was mixed. Activity in the residential real estate market continued to increase robustly, while commercial real

estate activity improved slightly. Lending activity was steady over the reporting period.

Labor Markets

the manufacturing sector observed a slight deceleration

in the rate of wage inflation.

Employment levels grew further, with reports focusing on

labor market tightness. Firms across the District continued to cite difficulties attracting qualified candidates for

both high- and low-skilled positions, with many reporting

elevated numbers for job openings and few applicants.

Labor shortages for entry-level and low-wage positions

were widespread, especially in the consumer services

and farming industries. Firms in the finance, manufacturing, and energy sectors reported stable employment

levels and comparatively lower turnover. Meanwhile,

firms looking to fill openings for accounting, legal, technology, architecture, construction, and engineering positions continued to compete intensely for talent. Many

contacts across the District mentioned higher rates of

voluntary quits and early retirements, partially due to

concerns about health risks during the recent Omicron

wave. A few employers in Alaska and Utah highlighted

especially difficult hiring conditions, citing candidates

who missed scheduled interviews and newly hired workers who failed to show up on the first day at their new

job.

Prices

Prices climbed notably across the District. Contacts

reported widespread price increases as higher material

and labor costs were partially passed on to clients. Energy, transportation, and storage costs also contributed to

further price increases across most sectors, including

prices for construction materials and paper products. In

agriculture, lower export sales increased domestic supply levels, which partially offset upward price pressures

from higher input costs. A few contacts raised concerns

that price hikes arising from wage increases may fuel

further wage pressures going forward.

Retail Trade and Services

Sales of retail goods increased solidly over the reporting

period. Retailers across the District generally reported

strong brick-and-mortar and online sales. Shipping delays and increased input costs continued to considerably

affect the retail sector, causing inventory levels to be

erratic in some areas. Contacts in the textile and garment sector reported tighter inventory, with some taking

over their own wholesale supply in response. A few

retailers noticed that sales of high-end or discretionary

goods declined somewhat due to price increases. In the

Mountain West, a contact mentioned that local and regional firms expanded into locations vacated by national

brands. A contact in Arizona highlighted even tighter

availability of retail goods in certain tribal communities,

Wages increased considerably over the reporting period.

The mismatch in supply and demand for workers continued to put upward pressure on wages, especially in the

consumer services sector. Contacts across the District

reported increasing wages from 3 to 20 percent, depending on the skill level and sector. California contacts mentioned additional pressure from new minimum wage

legislation that came into effect in early 2022. A few from

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Federal Reserve Bank of San Francisco

partially due to a higher incidence of COVID-19 cases.

nation process for this year’s crop. One exporter in the

Pacific Northwest highlighted that the recent shift in

sales toward the domestic market negatively affected

profitability, while another grower in California expected

this shift to be reverted once supply chain issues are

alleviated.

Activity in the consumer and business services sectors

picked up in recent weeks, following a decrease in new

COVID cases related to the Omicron variant. Consumer

services, such as those related to tourism, hospitality,

entertainment, and restaurants, observed increased

demand in many areas, including Hawaii and Alaska.

Nonetheless, providers continued to report supply chain

disruptions and worker shortages, which impacted their

ability to meet demand. Some professional services,

including business consulting and legal services, observed increased demand and faster fulfilment of existing contracts despite difficulties in hiring. Health care,

with still-elevated demand for medical services and

hospital beds, struggled to reconcile with supply and

staff shortages.

Real Estate and Construction

Activity in the residential real estate market increased

robustly. Residential construction and sales remained

strong in both single-family and multifamily housing

sectors. Nonetheless, ongoing shortages for material,

workers, and land, as well as increased costs for lumber

in particular, continued to delay construction projects’

completion times. The pace of home price increases

remained elevated but decelerated slightly relative to

recent trends, while inventories remained tight. A contact

in Alaska noted that supply chain delays from Canada

further tightened the availability of materials in the area.

A few contacts mentioned increased uncertainty concerning fiscal support for infrastructure investment. Reports also highlighted higher rents for multifamily units in

major metropolitan areas.

Manufacturing

Conditions in the manufacturing sector were mixed.

Many manufacturers continue to report difficulties in

filling orders due to supply chain disruptions, worker

shortages, tight inventories, and increased material

costs, such as those for lumber and steel. Manufacturers

in the tourism-related sectors, such as for luxury products including leisure boats, noted a push to hire management consulting services from local markets as a

way to respond to supply chain issues. Other contacts

reported experiencing a better standing in dealing with

supply hurdles and higher costs, resulting in fulfillment of

more orders and elevated capacity utilization. A manufacturer of packaging machinery noted increased demand for process automation equipment in the face of

widespread worker shortages. A manufacturer of renewable energy equipment highlighted uncertainty regarding

fiscal policy and continued infrastructure investment.

Commercial real estate activity increased slightly on

balance, with recovery in the sector reportedly lagging

that of the overall economy. Sales and rentals of commercial and office spaces have picked up somewhat

over the reporting period, but new business investment

in commercial real estate remained generally lackluster.

A financier in the Pacific Northwest noted that expectations for increased borrowing rates have already affected

demand for new commercial construction. Conversely,

demand for construction of manufacturing, storage, and

distribution facilities remained strong.

Financial Institutions

Agriculture and Resource-Related Industries

Lending activity was steady over the reporting period.

Loan demand remained high despite long-term rate

increases, but demand for commercial loans lagged that

of consumer loans. Liquidity remained elevated, which

further contributed to tight competition for loans. Most

bankers reported high and improving credit quality, but a

few others cautioned against a slight relaxation of underwriting requirements. A financier in Arizona highlighted

that lending conditions within traditionally underserved

communities remained quite tight. ■

Conditions in the agriculture and resource-related industries remained largely comparable to the previous reporting period. Sales of agricultural goods remained strong

overall, with shipping delays and slightly fewer orders

from abroad somewhat offset by domestic customers

looking to fill back orders. Inventories of crops such as

nuts and raisins remained at reasonable levels, while

those for cut flowers, potted plants, fruits, and other tree

crops dwindled a bit. Short supply of labor, materials,

machinery, water, and fertilizer impacted the early polli-

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