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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (42605)	3/8/2000 7:45:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

FED'S BEIGE BOOK:MOST DISTRICTS FOUND'UPWARD WAGE PRESSURE' By Steven K. Beckner Market News International - With the economy enjoying "appreciable expansion" from coast to coast and with already tight labor markets tightening further, most Federal Reserve Banks detected "upward wage pressure" in their districts, according to the Fed's beige book survey released Wednesday. Price increases at the retail level remained "limited overall," but there were "noticeable" increases in prices of transportation services and various industrial commodities, stated the beige book, prepared by the San Francisco Fed, using information collected before Feb. 29. The beige book survey, which will be reviewed at the March 21 Federal Open Market Committee meeting, also detected strong consumer spending, manufacturing and loan demand. Even in construction there has been only "slight cooling" from still "high levels," the beige book said. "Constraints on the availability of labor and other production inputs were apparent in many areas," the Fed document said. "Most districts reported tight supplies and upward wage pressure for various types of labor, both skilled and entry level." The beige book further said that "labor markets were very tight in most areas, and wage pressures increased for some worker groups." Although "most reports suggested moderate wage gains on net," there were "widespread" reports of "recruitment obstacles," increased reliance on overtime and the use of bonuses and other "employment perquisites" in lieu of wage hikes. The Chicago Fed reported "a sharp increase in truckers' wages. The San Francisco Fed, whose district represents nearly a fifth of the nation's GDP, said "respondents from the retail, agriculture and manufacturing sectors indicated increases in wage pressures, especially for those with computer and other technical skills." Wage gains were said to be in the 3%-5% range in St. Louis and 2%-4% in Minneapolis, while the Kansas City Fed found that wage pressures had actually "eased" relative to the second half of 1999. However, the New York Fed reported "wage increases of 10 to 15% in jobs being filled by year 2000 college graduates recruited through employment agencies there, and Philadelphia reported faster wage gains overall." "Despite faster wage growth for some workers, increases in the prices of final goods and services were limited overall," the beige book said, but it said "the prices of transportation services and some industrial commodities rose noticeably" -- and not just for oil. "...Rising wages and fuel costs have raised prices and reduced profit margins for providers of transportation services, especially trucking," the beige book said. "Other commodity inputs and raw materials with noticeable price increases included steel, primary metals, building materials and computer memory chips in the industrial sector and chemicals and fertilizers in the agricultural sector." The Fed survey said reports from all 12 Fed districts "indicated appreciable expansion of economic activity during late January and February." A majority reported "strong growth," while the other Banks reported "moderate growth or continued high levels of activity." The beige book said "retail sales expanded significantly over their year-earlier levels" and that sales were "strong in most areas," either meeting or exceeding expectations. Demand for autos and light trucks was called "solid on net." In manufacturing, gains in output were "widespread," according to the survey, with most districts reporting a pickup in activity. Gains were "moderate in general," but there was "considerable strengthening" in Richmond and "strong growth in demand for industrial machinery" in Cleveland. Demand "grew substantially" for an array of manufactured goods, including metal products, electronics, furniture, chemicals, paper and food. Demand for steel was "especially strong." Although a decline in service employment was one of the factors minimizing non-farm payroll growth in February, the beige book reports that, "Providers of services to businesses and consumers continued to expand output and employment substantially." In the financial sector, the Fed said "demand for bank loans generally was strong, but several districts reported slower activity in some loan categories, especially consumer loans and residential mortgages." "Credit quality and lending standards were stable in general, although New York and Kansas City reported tighter standards for some banks," the beige book said.