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Labor Markets
District employment agencies continue to have difficulty finding enough bodies to fill the positions available. Agencies report that demand for temporary workers is significantly higher than this time last year, with administrative assistants and computer support personnel in especially short supply. Wage growth at temporary help agencies varies by region. The largest wage increases are reported in southern Ohio.
Tight labor markets have helped push up collective bargaining settlements slightly for all industries except mining. Overall wage increases vary from 3% to 3 3/4%. However, concern over job security is reportedly easing wage pressures--some sources indicate having foregone wage gains in favor of a commitment on employment. No wage growth is reported in the mining sector, which continues to suffer reversals, as low oil prices and environmental legislation have cut into the industry's growth rate.
Construction
Residential construction activity remains brisk throughout the District. One contact reported sales for 1999:QII that were 15% above the same period a year ago. Commercial construction remains essentially unchanged from the spring and less frenzied than residential construction. While business conditions here are generally considered good, some concern was expressed over slack orders for year-end commercial building.
Construction cost increases are generally modest, although drywall and lumber prices are rising due to short supply. Labor costs are relatively stable, but contractors continue to have difficulty finding workers in the skilled trades.
Agriculture
Low prices and a lack of rain have put pressure on the District's farming sector. Drought conditions exist in the eastern half of the District. Livestock farmers report poor pasture conditions. As a result, farmers have had to deplete their winter hay stores. Dairy farmers also indicate that high temperatures in July have hindered milk production.
Crop conditions are more favorable in the western reaches of the District, although conditions could change significantly over the next several weeks without additional rainfall. The corn and soybean crops have developed ahead of schedule and remain in relatively good shape. Still, crop prices are exceptionally low, presumably due to weak export markets, and many farmers are receiving federal crop subsidies.
Industrial Activity
Industrial activity is still gaining strength following some softness earlier in the year. Capital goods makers report generally good orders' growth. Heavy truck manufacturers see record-high orders and production, and the orders' books in this industry are virtually full for at least the remainder of the year. Solid orders growth is also noted for telecommunications components. Some weakness in farm equipment manufacturing is seen, however. No significant changes are reported in the steel industry for July. Steel demand remains adequate as a result of strong auto production and construction activity. Foreign competition remains fierce, although the falling value of the dollar appears to have helped to slow the growth rate of steel imports.
Commodity price increases vary widely by item and industry, although most manufacturers observe more upward pricing power than earlier in the year. Significant upward price movements are seen in paper and aluminum.
Consumer Spending
Retail sales are still growing and many sellers report double-digit gains over last year. Most of the retailers we contacted expressed optimism that sales will remain strong through the holiday shopping season. In an effort to insure against potential Y2K-related delays from foreign suppliers, some stores have accelerated their orders from abroad.
Sales of new vehicles have shown no sign of moderating during the traditionally slow summer season. Dealers often reported sales levels up 10% to 15% over last year, and this pace is expected to hold through the end of the model year. The rapid sales pace has resulted in lower-than-usual inventory levels at most dealerships. Some dealers report a model-year sellout of some vehicles, including some full-size pickups.
Banking and Finance
Lending activity in the District appears to have leveled off for both commercial and consumer loans. The growth rate of consumer loan demand has flattened, and borrowing rates have risen a bit during the past six weeks. Demand for commercial loans is soft, overall, although one bank reported an increase in small business lending.
Consumer and commercial loan delinquencies, already at low levels, improved further over the last six weeks. Most banks reported that credit quality has improved as a result of tightened lending standards. Still, the competition for borrowers is very tight and the spread between borrowing and lending rates is narrowing.
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Philadelphia