- Eric Miller/Reuters
The Dallas Federal Reserve just announced that its business-activity index figure rose to -1.3 in July.
Economists had expected the general business activity index to improve to -10.0 from the previous month’s -18.3, according to the Bloomberg consensus. The headline activity index has not turned positive since December 2014.
The report also includes comments from respondents’ completed surveys, edited slightly for publication.
And many in the July report pointed to the shortage of quality labor.
“Entry-level candidates cannot read or follow instructions. Most cannot do simple math problems. What is wrong with the educational system?” one respondent in chemical manufacturing said.
“The ability to find qualified employees is our largest problem at this time,” a respondent in fabricated metal product manufacturing said.A respondent in textile product mills expressed a similar sentiment.
Theoretically speaking, the idea of labor quality becoming a pressing issue for employers suggests that economic concerns are shifting from weak demand to tight supply. And that – again, theoretically – points to higher wages for workers. The basic thinking here is that when employers have a hard time finding quality workers, they end up having to shell out more money to attract them.
The Dallas Fed noted, however, that the wages and benefits index posted a double-digit decline – down to 10.5 in July from 21.6 in June – which suggests a slower rise in compensation. Moreover,more than 85% of manufacturers noted no change in compensation costs this month.
Still, some respondents did touch on labor costs. One person in nonmetallic mineral product manufacturing said labor costs were up by more than 10%.
Another person in fabricated metal product manufacturing said: “There is a shortage in both skilled and unskilled labor. With labor costs increasing, we may be forced to drop healthcare, which is increasing in cost also.”
- Dallas Fed
The report also said the production index, an important gauge of manufacturing conditions, came in near zero after two months of negative readings. This suggests that output stopped falling this month.
The employment index came in at -2.6, up from last month’s 11.5 – its lowest level since 2009. Fourteen percent of firms noted net hiring, while 17% indicated net layoffs.