Labor shortage poses "greatest challenge" to U.S. enterprises: Federal Reserve report

Worker shortages are the "greatest challenge" to the U.S. enterprises, followed by supply chain disruptions, as the U.S. Federal Reserve said in its Beige Book report on Wednesday.

The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information, gathered directly from each district's sources. Reports are published eight times a year.

The report said that most Federal Reserve Districts indicated slight or moderate growth since the prior Beige Book period, but four districts explicitly noted that the pace of growth had slowed. Inflation and rising interest rates have led to a weakness in the retail and housing sector.

The report showed that the plight job market is the greatest challenge facing enterprises as all the districts described the current labor market as tight.

Job openings in the U.S. fell slightly to 11.4 million in April, while hiring dropped to 6.6 million, indicating a tight labor market remains, the U.S. Department of Labor data showed Wednesday.

The Beige Book also showed that worker shortages continued to force many enterprises to operate below capacity. In response, firms continued to deploy automation, offer greater job flexibility and raise wages.

Most districts reported strong or robust price increases – especially for input prices. Two districts noted that this rapid inflation was a continuation of trend, while three districts observed that price increases for their own goods or services had moderated somewhat. About half of the districts observed that many enterprises maintained pricing power – passing costs on to clients and consumers. But more than half of the districts cited some customer pushback, such as smaller volume purchases or substitution of less expensive brands.

Besides labor shortages, supply chain disruptions, rising interest rates, inflation, the Russia-Ukraine conflict, and the impact from COVID-19 cases (especially in the Northeast) are the key concerns affecting household and business plans. Eight districts reported that expectations of future growth had diminished; and enterprises in three districts specifically expressed concerns about a recession. MS Television reports