June 17, 1998
Federal Reserve Districts
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The District economy continues to expand amid relatively modest inflation. Some acceleration in wage growth has been seen, however.
Temporary employment agencies report that clerical help, general laborers, and warehouse workers are in extremely high demand and an increasing number of jobs are going unfilled. Some agencies have increased their wage rates several times this year. Furthermore, a much higher share of job placements is for permanent positions.
Sources in organized labor report seeing a modest acceleration in wage growth recently, from about 3% annually to a little above 3%. Contract lengths appear to be increasing, and the prevalence of cost-of-living clauses has diminished.
After dampening compensation growth for the past several years, the rise in medical benefit costs is outpacing wage growth. Still, fierce competition among health care providers is said to be having a moderating effect on the rate of the acceleration.
Compared to this time last year, the District has seen a 7% increase in the wages of field workers and a 3½% increase in the wages of livestock workers.
The costs associated with construction projects are holding steady overall. Land prices are rising at a slightly greater pace in the Cleveland and Columbus areas than they were earlier this year, but materials costs are generally flat. Although labor shortages are reported in most regions, wage growth for construction workers has been modest.
Commodity and finished goods prices are holding steady, with the exception of some paper prices, which have been rising recently. Inventory levels are also reported to have moved up of late, but stocks generally appear to be in line with production levels.
Sales of new vehicles have picked up in the last two months and were especially strong in May. New vehicle leases are tapering off, commensurate with higher lease rates. A rise in used car sales has also been noted. Dealers are anticipating continued strong sales through the end of the model year, and inventory stockpiling is reported.
Banking and Finance
Competition for borrowers remains intense, and these pressures continue to squeeze the spread between borrowing and lending rates. Overall, credit standards and banks' willingness to lend remain constant, but a few institutions have repeatedly voiced concern about a persistent loosening in credit standards.