June 18, 1997
Federal Reserve Districts
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Most First District contacts in the retail and manufacturing sectors continue to report growing sales, and many are increasing employment as well. Temporary employment firms, residential real estate, and the mutual fund industry are all growing strongly, although somewhat less so than earlier. Contacts cite generally stable prices; one exception is house prices in the Boston metropolitan area which are up noticeably. Wage increases are concentrated in the 3 to 5 percent range, with larger increases and shortages confined to a few markets, notably high technology and asset management occupations.
Wage rate growth is reported to be moderate as employment increases support rising sales. Contacts say that although employee turnover is rising, they are having little trouble finding replacements, except in a few areas.
All the retailers contacted are holding their selling prices steady, constrained by competitive pressures. Most respondents say that profit margins are increasing modestly as a result of efficiency improvements (better inventory control, automation, and purchasing efficiencies). Materials costs are also holding steady. Expecting continued growth, respondents have capital expansions underway.
Most manufacturers indicate little if any pressure from materials costs. A notable exception is the price of wool, up sharply in recent months. Selling prices are also largely stable. Some contacts report that retail stores are pressing for concessions.
Respondents generally report that employment levels are a little higher than a year ago. Except for some delays in filling vacancies in software, engineering, and international marketing, labor availability is said to be adequate. Wages and salaries are reported to be rising in the range of 2 to 5 percent, with substantially higher increases and added perks offered in occupations that are in heavy demand.
Most respondents indicate little change in the level of capital spending from a year earlier. Those making aggressive investments cite a need to develop new products or install more sophisticated equipment.
Manufacturers generally expect a continuation of positive business trends, although some are now expressing a little caution. Commodity-type producers tend to have a more conservative outlook than others.
Temporary Employment Firms
Residential Real Estate
Other parts of New England are mixed. Southern New Hampshire is similar to the Greater Boston area, but central New Hampshire, Maine, and Vermont have experienced only moderate increases in prices and sales. Rhode Island has seen minor changes. Some parts of Connecticut are very strong (influenced by the strong New York market), while others have not yet recovered from the downturn of the early 1990s.
Nonbank Financial Services
All the investment management respondents report they have increased employment since the beginning of the year, and they plan further increases. Firms report difficulty filling vacancies because of tight labor markets; shortages were noted in several segments, including customer service personnel, fund accountants, sales/marketing and investment analysts, portfolio managers, and most acutely, technology professionals. Contacts note that wage movements exceed inflation and report having to pay higher bonuses and other incentive compensation to a wider range of employees throughout their organizations.