WASHINGTON—A tight labor market and rising wages aren’t generating substantial inflation pressure, a Federal Reserve report said Wednesday, muddying the economic outlook for Fed officials ahead of their September policy meeting.
Overall, the economy continued to expand at a modest pace in July and August, and respondents said they expected growth to continue at a “moderate” pace in the coming months, according to the central bank’s beige book, a review of regional economic conditions. The survey collected anecdotal information on economic activity from early July through Aug. 29, from 12 district banks.
Most districts cited tight labor markets and moderate growth in hiring, consistent with steady payroll gains reported by the Labor Department in the past two months. Upward pressure on wages continued to build, especially for workers with specialized skill sets such as engineers and certain construction workers. But the pickup in wages didn’t translate into significant inflation pressure, the report said. Price increases were described as “slight overall.”
The report illustrates some of the challenges facing the U.S. economy as it struggles to break out of its uninspired growth trajectory in the third quarter. Hiring has been steady throughout much of the expansion, but has only recently begun to translate into noticeable wage gains. Low energy prices for much of the past two years held inflation in check. In July and August, the beige book reported, a “potential record national harvest” weighed on prices for agricultural products.