Wages rising moderately, but tariffs hitting businesses: Fed
Wage growth in the United States has “tended to the higher side of a modest to moderate pace,” according to a new report from the Federal Reserve, even as tariffs have begun to bite into businesses’ bottom lines.
The central bank’s “Beige Book,” a compilation of economic reports from the 12 Federal Reserve district banks, found that businesses were facing a tight labor market, and having trouble attracting and retaining workers.
As a result, wages were starting to heat up. Businesses were also putting more money toward other benefits, such as health insurance, vacation and profit-sharing.
“Several Chicago firms reported that some employees have simply quit — with no notice nor means of contact,” the report noted in a pointed example.
{mosads}But President Trump’s tariffs have also begun nipping at businesses and their bottom lines. For now, the report noted, businesses have not translated those added costs into higher prices.
“Nearly all reported that input costs rose faster than final goods prices. Reports of tariff-induced cost increases have spread more broadly from manufacturers and contractors to retailers and restaurants,” the report said.
Overall, the Fed found that the economy had “expanded at a modest or moderate pace” across the 12 districts between mid-October and November.
The report, which comes ahead of a scheduled interest rate-setting Federal Open Market Committee meeting later this month, highlights key challenges for Trump heading into 2019.
Democrats have accused Trump of running an economy that has given major returns to the wealthy, even as worker wages are only growing at a moderate pace.
Trump has entangled himself in a tough trade war with China and has yet to secure agreements to de-escalate additional fronts with close U.S. allies, such as Canada, Mexico and Europe.
On Tuesday, the Dow Jones dropped amid concerns over a slowing economy and trade concerns after Trump declared himself a “Tariffs Man” on Twitter.
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