Fed’s Beige Book notes shift in employers’ choices for filling vacant jobsHigher manufacturing production over the next six months was forecast by just one of three contacts in the sector, according to the Beige Book released Wednesday by the Federal Reserve. Credit: workforce.georgia.gov
By David Pendered
Jobs remain hard to fill in metro Atlanta and across the Southeast, though business leaders continue to resist raising wages to attract employees, according to the latest federal report on the economy.
The focus of the problem with hiring has shifted slightly in the latest edition of the Beige Book, compared to reports issued previously this year. The Federal Reserve on Wednesday released its periodic, anecdotal report on the nation’s economy.
Now the Fed’s business contacts are saying that recruiting competent workers is:
- “[A] problem often not solved by increasing pay but by focusing on developing and training internal staff.”
This frames the problem differently from how it was framed in the recent past.
The Jan. 17 edition stated expressly that businesses were reluctant to raise wages in order to keep a lid on their costs. Consequently, employers were more inclined to train existing staff to do the work than they were to raising wages to attract folks who have the skills to do the work:
- “[T]he top constraints to hiring were a desire to keep operating costs low and an inability to find workers with requisite skills. A number of contacts continued to describe challenges filling and retaining highly-skilled/ specialized and low-skilled/entry-level positions. To find and retain workers, firms continued to broaden their geographical search for candidates and develop or expand training programs.”
Likewise, in April the Fed reported that businesses preferred to use on-the-job training programs to fill vacancies with existing employees, rather than raising wages:
“In response to labor shortages, firms continued to enhance training efforts for less-experienced candidates, expand partnerships with workforce development entities and community colleges, and broaden their geographical search for candidates.”
The April edition also observed that employers favored incentives other than higher wages. That’s because the incentives can be removed, whereas reducing wages was perceived as a potential headache:
- “Employers continued to share that they were increasing the proportion of employee compensation that is not permanent and can be withdrawn, if needed (e.g., bonuses, incentives, etc.).”
Turnover is the outcome of these staffing decisions, according to the July 18 edition of the Beige Book. Evidently, employees have no reluctance to leap for a better opportunity:
- “Some contacts cited persistent challenges with turnover; as a result, they were increasingly investing resources in retention efforts.”
The report provides few details about the nature of these retention efforts. This is all that’s stated:
- “On average, three percent annual increases were the norm; however, a growing number of firms noted that when they were not able to meet de- mand with existing staff, wage increases were around five to ten percent (or greater) as an effort to attract and retain workers.
- “Business contacts continued to report using benefits, bonuses, incentives, and other forms of compensation that are temporary or can be withdrawn if necessary.”
The Fed summarized the economic impact of the Atlanta district as follows. The district includes Alabama, Florida and Georgia, and portions of Louisiana, Mississippi and Tennessee:
- “On balance, reports from Sixth District business contacts indicated that economic activity continued to expand at a modest pace from mid-May through June. Although a number of contacts’ sentiment declined due to uncertainty related to the impact of tariffs and tariff rhetoric, the overall outlook among businesses remains positive as most expect an increase in activity for the second half of the year.
- “District firms continued to report difficulties filling positions with quality labor. On balance, wage growth remained steady. Businesses continued to report an increase in select non-labor input costs.
- “District merchants noted sales activity increased since the previous reporting period and sales of light trucks and small SUVs improved from a year ago. The tourism sector experienced solid activity throughout most of the District.
- Real estate contacts noted that new home sales were up slightly and existing home sales were flat to slightly down compared to a year earlier. Overall, the housing market experienced modest price appreciation. Commercial real estate contacts indicated that activity was solid.
- “Manufacturers reported growth in new orders and increasing production levels.”