Business activity continued to expand in January
Tenth District services activity continued to expand in January and expectations for future activity also grew (Chart 1). Input and selling price indexes rose at a faster pace compared with a month ago. Expectations for both future input and selling prices also increased further.
The month-over-month services composite index was 14 in January, slightly below 15 in December, but up from 9 in November (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Most month-over-month indexes continued to increase in January. The indexes for wages and benefits and inventories grew more rapidly in January. The general revenue/sales index remained high, driven by increases in wholesale, real estate, retail, health services, transportation, and professional and business services activity while restaurants and tourism activity declined. Year-over-year services indexes also remained positive, but slightly lower than last month, as the year-over-year composite index moderated from 25 to 20. Expectations for future services activity grew and the composite index rose from 15 to 28.
This month contacts were asked special questions about the labor market and wages. More than 67 percent of District business contacts reported workers were in short supply, similar to July 2019 when 68 percent of District firms reported workers were in short supply (Chart 2). Nearly 59 percent of firms reported they were raising wages more than normal to attract or keep workers in January 2020, compared with just 47 percent of firms having to raise wages more than normal in July 2019 (Chart 3).
Selected Services comments
“Lots of uncertainty with tariffs effect on prices and international trade.”
“We are discounting deeper and with more frequency to maintain sales growth.”
“We will be investing in new channels and sites in the next 6 months to a year.”
“Our revenue reduction is a result of seasonal influences.”
“Our basis for wages were above min wage to be competitive but we needed to raise them to stay that way after our state minimum wage went up.”
“It is hard to find employees.”
“There is a lot of wage pressure, which I have tried to manage in other ways by paying performance-based bonuses and offering other benefits. But, it isn’t enough. I’ll have to raise prices by 5-10% to keep up with the wage increase.”
“High employment rate makes hiring difficult.”
“This country is basically at full employment at 3.5%. All that is left are the hard core unemployable. We need H2B visa workers!”
“We are implementing additional incentives tied to production instead of raising hourly wages. Generally, we expect these added incentives to provide up to 10 additional compensation if targets are met.”
“The labor market has eased and we are seeing many more resumes.”
“It seems like workers are moving jobs for higher wages.”