WASHINGTON (AP) — The economy kept growing in April through late May, with more regions citing worker shortages across a widening range of occupations, the Federal Reserve reported Wednesday.
In its latest survey of economic conditions nationwide, the Fed found that most of its 12 regions viewed economic growth as moderate to modest rates. Two districts — Boston and Chicago — said growth had slowed, while New York said business activity had "flattened out."
Businesses reported that labor markets continued to tighten, and many firms were offering higher wages where shortages were most severe. One firm in the district of the Fed's Chicago regional bank said that it had been able to attract better applicants and improve the retention of unskilled workers by raising wages 10 percent.
The information in the Fed's survey, known as the Beige Book, will be used when Fed officials meet June 13-14. The Fed is expected to raise a key interest rate at the meeting.
The Fed cut its key policy rate to a record low near zero in December 2008 and left it there for seven years as it tried to stimulate borrowing and economic activity to lift the country out of the worst economic downturn since the 1930s.
The Fed raised rates for the first time on December 2015 and then again a year later in December 2016. After those two rate hikes, it raised rates a third time in March. The Fed has signaled that it expects to raise rates a total of three times this year to make sure that tighter labor markets do not trigger unwanted inflation pressures.
The unemployment rate in May fell to a decade low of 4.4 percent, below the level the Fed considers as full employment.
Even with the tightening labor markets and more companies offering higher wages, the Fed said that business contacts noted little change to the broader recent trend of modest to moderate wage growth.
In terms of overall inflation, the Fed report said that price pressures were little changed from the previous report. However, it noted "rapidly rising costs for lumber, steel and other commodities," which tended to push up supply costs for some manufacturers and the construction industry. In contrast, the report said that some districts reported falling prices for some consumer goods such as groceries, clothing and autos.
Energy prices and farm prices were reported as mixed, but low inventories of available homes for sale were pushing up real estate prices in many markets.