The Federal Reserve's Beige Book Summary

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Agriculture

Agricultural conditions varied across Districts. High temperatures and drought conditions resulted in damage to crops and pastures in the Richmond, Atlanta, Chicago, and St. Louis Districts. According to some estimates, the drought could cost Georgia and Florida farmers over $2 billion in lost production. Nevertheless, a report from Chicago indicated that even with unfavorable weather, the District was poised for a record corn harvest because farmers had planted more corn at the expense of soybeans. In the Dallas and San Francisco Districts, favorable summer rains boosted pasture growth and livestock conditions. Rains in the Kansas City District resulted in above-average wheat yields and improved growing conditions for corn and soybeans, which placed some downward pressure on crop prices. Further, livestock prices remained solid, although rising production costs trimmed margins for hog producers and cattle feedlot operators. In the San Francisco District, demand for agricultural products continued to grow, and supply conditions were largely favorable. Some agricultural contacts reported that pressures on input costs eased overall, but others noted that prices of feed grain increased further.

Natural Resources

Activity in the energy and mining sectors remained positive as increases were observed in all Districts reporting on these developments. In Dallas, energy activity remained robust—domestic drilling has flattened out, while international drilling is growing and remained the primary source of strength for service companies. Kansas City reported stable drilling activity and expected increased activity heading forward. Cleveland's oil and gas producers reported production levels were flat to increasing slightly since mid-July. Both Cleveland and Kansas City cite the lack of qualified labor as a continuing strain on expansion. In the Minneapolis District, activity increased since the previous report, with mining production remaining at near capacity. The Atlanta District reported that Hurricane Dean did not have a significant impact on energy production along the Louisiana coast.

Labor Markets, Wages, and Prices

Nearly every District reported at least modest increases in employment during the recent survey period. The lone exception was Chicago, which, instead, characterized employment conditions as mixed. Philadelphia and San Francisco made no statement characterizing overall changes in District employment. New York, Richmond, Atlanta, Minneapolis, and Dallas described their labor markets as tight. Nine of the twelve Districts reported that there were shortages of some skilled workers, including those in the information technology, accountancy, legal, and health care professions. In addition, Kansas City noted shortages for workers with lower skills, such as housekeepers and waiters, while San Francisco reported that agricultural workers were in increasingly short supply. Staffing services firms reported more demand for temporary workers in several Districts (Boston, Richmond, and Dallas), but less demand in Cleveland. Several Districts reported declines in construction employment, though the San Francisco District reported that, in some areas, rising commercial construction has helped keep overall construction employment stable.

Though some Districts described employment condition as tight, most reported that wage increases were moderate or steady. Wage pressures were intense only in isolated professions in short supply. Several Districts also noted that costs of health care benefits continued to post large increases, although they were not accelerating.

Most Districts reported little change in overall price pressures. There was downward pressure on residential real estate prices across nearly all Districts. Three Districts—Boston, Philadelphia, and Dallas—reported lower lumber prices, while Atlanta reported that these prices stabilized. Three Districts noted discounting among retailers during the back-to-school selling season (New York, Philadelphia, and Dallas), while two others reported overall declines in retailers' prices (Richmond and Kansas City). However, higher food costs continued to be widely reported and were said to be putting upward pressure on grocery and restaurant prices.