U.S. labor markets continued to tighten but with little impact on wage growth while manufacturing across the United States is hurting from the recent strength of the dollar, the Federal Reserve said on Wednesday.
Overall, U.S. economic activity continued to expand modestly from mid-August through early October, the Fed said in its Beige Book report of anecdotal information on business activity collected from contacts nationwide.
The U.S. central bank said manufacturing conditions were “generally sluggish” with the slowdown in China taking a back seat to the stronger dollar as the most immediate headwind.
“A number of districts cite the strong dollar as restraining manufacturing activity as well as tourism spending,” the report said. In particular, the steel sector remained weak, as the dollar’s appreciation increased import competition, especially from China.
The Fed said labor markets tightened in most districts with some reports of labor shortages, particularly for skilled workers.
However, in a worrying sign as the central bank continues to mull a rise in interest rates for the first time in almost a decade, reports of wage gains were “mostly subdued” with only “scattered reports” of wage gain pressures. These were concentrated among highly skilled workers, the Fed said.