Federal Reserve Bank of Boston

Summary of Economic Activity

Economic activity was about flat on balance, but performance was quite mixed both across and within sectors. Prices increased further at a modest pace, and employment was steady amid slow-to-moderate wage growth. Retail sales softened somewhat, and hospitality activity was stable or up modestly. Manufacturers reported strong revenue growth on average, while staffing firms reported only slight revenue gains. Residential home sales declined moderately compared with year-earlier levels despite some recent seasonal growth in sales. Commercial real estate activity decreased slightly, with new softness in the industrial leasing market, and the possibility of a surge in office foreclosures remained a significant concern. The outlook was cautiously optimistic on average, but selected contacts expressed either greater uncertainty or an uptick in downside risks.

Labor Markets

Employment was unchanged overall, and wages increased at a slow-to-moderate pace. Labor demand weakened somewhat, as job openings fell slightly, and layoffs picked up a bit. A large clothing retailer let go 150 workers by closing a call center, citing the shift towards more automated customer service technologies as the driver. Headcounts were steady or up slightly among manufacturers. Demand fell for legal support roles but remained robust for convention-industry roles. Labor supply improved moderately in the medical sector and for retail and restaurant jobs. Employers enjoyed increased bargaining power relative to one year ago, and sign-on and retention bonuses have mostly reverted back to pre-pandemic levels. Among manufacturers, wages increased moderately on balance, although one contact said that recent wage growth had exceeded its typical pre-2020 levels. Wage pressures eased among retail and hospitality establishments, resulting in modest average wage increases. Hiring plans were muted across sectors, mostly aimed at offsetting retirements and other sources of attrition.

Workforce development contacts described new training programs teaching life skills and basic professionalism. One contact described efforts to match students with jobs before they graduated from the program as a way to reduce attrition.


Prices increased at a modest pace on average, and input cost movements were mixed. Restaurateurs reported modest increases across a range of food inputs but held menu prices steady, resulting in a further narrowing of profit margins. Hotel room rates increased from a year earlier at a pace of just under two percent, the slowest in recent years. Among manufacturers, input price pressures moderated, and costs were flat in some cases, but one contact noted that plastics and electronics prices remained elevated. Output prices increased by an above-average margin at one manufacturer, driven by robust demand and modest cost pressures, but otherwise manufacturers' output prices were up only modestly. Plans called for muted price growth on balance moving forward, as there was concern about consumer pushback from significant further price increases. In fact, one large clothing retailer, in response to recent input price declines, planned to enact modest price reductions on selected items in early fall in a bid to boost sales.

Retail and Tourism

Retail and tourism sales were slightly weaker overall in recent months, although results were mixed. A clothing retailer experienced softer sales this winter and spring, posting a moderate decline in sales from one year earlier. A discount retailer posted a weaker than expected March and April but pointed to late season snowstorms as the culprit, as recent weeks saw rebounding sales. A Massachusetts restaurant industry contact reported an exceptionally strong Mother's Day but said that sales had otherwise been flat. Hotel occupancy rates in Greater Boston were stable recently, with a year-over-year growth rate of two percent. Restaurants were optimistic for the summer months, and retailers were cautiously optimistic, but contacts in both industries emphasized that consumers remained highly price-conscious, and at least one retailer perceived that consumer spending risks were skewed to the downside.

Manufacturing and Related Services

Manufacturing revenues increased at a moderate pace on average but spanned a range of outcomes. A maker of veterinary care products posted robust sales growth amid strong demand for pet care but lamented that weak labor supply constrained the number of vet clinic visits. A small consumer goods manufacturer experienced remarkable growth in sales, exceeding already high expectations. Others reported flat or modestly lower sales that were nonetheless in line with or above expectations. Capital spending was steady and near-term plans were unchanged. Contacts expected modest to strong sales growth in the coming quarters, even those with relatively weak recent sales. Optimism for the second half of 2024 was driven in some cases by recent momentum in demand for AI-related products and other new technologies.

Staffing Services

First District staffing firms experienced mixed changes in activity, with revenues increasing slightly on balance. Contacts said that demand for direct hires was down sharply from one year ago, while demand for temporary hires and temporary-to-permanent conversions increased considerably for the same period. Expectations were split, in line with firms' own recent performance, but on balance revenues were expected to increase slightly in the second half of 2024. One contact expected that their recent acquisition of another staffing firm would enable them to expand their presence in New England.

Commercial Real Estate

According to industry contacts, commercial real estate activity in the First District decreased slightly since April. Industrial leasing activity softened modestly overall but declined sharply in Connecticut. Industrial rents continued to rise, albeit less rapidly than in previous months. In the office market, leasing activity was mostly flat at a subdued pace, vacancy rates edged up further, and rents were flat or down moderately. The retail class experienced stable activity and rents. Investment sales remained mostly frozen as borrowing rates remained high, and lending activity was very limited. Unfavorable borrowing terms also contributed to modest declines in construction activity. Banks continued to extend underperforming office loans in anticipation of eventual declines in interest rates, but contacts remained concerned that a significant uptick in foreclosures was inevitable, especially in the class B market. Contacts expected commercial real estate activity to remain largely static moving forward, or if anything to weaken slightly. The subdued outlook was attributed to uncertainty concerning the timing of rate cuts by the Fed as well as over the outcome of the presidential election.

Residential Real Estate

First District home sales, considering year-over-year changes, posted mixed results in March and April after increasing in February. Closed residential sales increased at an above-average pace in New Hampshire and Maine in April from a year earlier, in both cases buoyed by increased inventories. In both Rhode Island and Vermont, single-family sales fell moderately over the year, while condominium sales increased either slightly (in Rhode Island) or moderately (in Vermont). Massachusetts posted year-over-year declines in sales in March for all residential property types despite a modest seasonal upswing in sales from the previous month, as activity was held back by declining inventories. Contacts stressed that inventory levels remained very low across the region, leading to ongoing, moderate-to-robust increases in house prices, and realtors expressed support for policies that would make it easier to build accessory dwelling units on existing properties. The outlook was neutral to cautiously optimistic, with a contact in the Boston area encouraged by recent increases in pending sales.

For more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx.

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Last Update: May 29, 2024