WASHINGTON (AP) — The Federal Reserve said Wednesday the U.S. economy kept expanding in the early spring, with tight labor markets and many businesses reporting rising wages.
In its latest survey of economic conditions nationwide, the central bank found that it's 12 regional banks all depicted growth as either "modest or moderate" from mid-March through early April. The strength came from consumer spending, tourism, housing construction and manufacturing.
The report said businesses reported tight labor markets with more job turnover and bigger wage increases for workers whose skills were in short supply.
The Fed's survey, known as the Beige Book, will be used when Fed officials next meet on May 2-3. The Fed raised rates by a quarter-point in December and March, but analysts are not expecting a rate hike in May.
The Fed is continuing to project three rate hikes this year. Officials say they are close to achieving their goals of maximum employment and inflation rising at an annual rate of 2 percent.
In fact, the unemployment rate dropped to a low of 4.5 percent in March, below the 4.8 percent level that the Fed views as full employment. But with inflation still below the central bank's 2 percent target, Fed officials contend they can still let the economy grow without the need to greatly accelerate the rate at which they raise interest rates.
The Beige Book report showed that the low level of unemployment, which had hit a high of 10 percent during the last recession, was beginning to boost wages, something the Fed has been hoping to see.
"Labor markets remained tight and employers in most districts had more difficulty filling low-skilled positions," the Fed said.
It noted that wage increases remained modest, although businesses were being forced to offer bigger increases to workers with skills that are in short supply.
"A larger number of firms mentioned higher turnover rates and more difficulty retaining workers," the report said.
Two districts reported that worker shortages and increased labor costs were restraining growth in some sectors including manufacturing, transportation and construction.
Even with wages rising at a faster pace, the report said that overall inflation remained modest. While oil prices had risen since the last report, the new survey found that overall energy prices were flat to slightly lower.
Farmers have struggled with falling commodity prices over the past year. The new report found farm prices varied with increases for cotton, peanuts, chickens and hogs while the price of corn and wheat had declined. The Kansas City district reported that agricultural conditions remained generally weak although there had been some improvement in cattle and soybean markets.
Minneapolis reported a wave of closings for retail establishments, which had affected both large and small stores. The Federal Reserve Bank of Dallas said that the energy sector, which last year had struggled with falling prices, had picked up notably and that rebound was helping manufacturers of fabricated metals which are used in energy drilling.
St. Louis reported that coal production in the district was 10 percent higher than a year ago.
While the manufacturing sector continued to expand at a modest pace, the growth in freight shipments had slowed. The gain in consumer spending was led by stronger auto sales which offset somewhat softer readings in non-auto spending.
Many districts reported that home construction accelerated, although sales growth was constrained by a lack of inventory.