United States labor market tightens, strong dollar causing headwinds: Fed

The report, based on anecdotes in the Fed’s regional survey of economic conditions known as the beige book, said a number of districts cited the strong dollar as restraining manufacturing activity and tourism spending. That appears to represent a slight downgrade from its previous report, which said the economy expanded moderately in six regions.

Labor markets tightened in most districts, as a few reported labor shortages, particularly for skilled workers. A key report about the United States economy released offered a cautious take on the U.S. economy, further lending credence to speculation that the Federal Reserve will not raise interest rates this year.

If USA employers were especially anxious, it wasn’t reflected in the Fed’s latest report, which covers activity from mid-August through early October, during the latest bout of global market turmoil.

As per the report, manufacturing has turned in a mixed but generally weaker performance during the period, with a number of Districts noting adverse effects from the energy sector.

But new doubts emerged this week among the top ranks of the Federal Reserve.

However, consumer spending, driver of two thirds of the U.S. output, grew moderately, led by sharper gains in auto sales.

The stronger greenback also heightened the competition from Chinese imports, steel industry officials in several districts said.

Reports from the 12 districts pointed to “continued modest expansion”, the Fed said.

“Oil price declines continue to trickle down the price pipeline, and the larger than expected declines in headline and core PPI will likely translate into softer than expected CPI data later this week”, said Sophia Kearney-Lederman, an economic analyst at FTN Financial.

In contrast, two Fed governors, Lael Brainard and Daniel Tarullo, urged patience in raising the benchmark federal funds rate in comments this week.

“Despite the downside risks, a majority of our contacts are cautiously optimistic in their outlook for the remainder of 2015”, the Cleveland Fed said in a summary of its findings.

The Fed’s report echoes other recent data that suggest the economy, though still expanding, has run into headwinds from overseas and lost momentum. The nine remaining districts, if they described growth, reported it as modest or moderate.

Meanwhile, the Commerce Department announced Wednesday that advance estimates of US retail and food services sales for September increased 0.1 percent from the previous month to 447.7 billion USA dollars, on par with market expectations.

It also noted that wage growth across the country was “subdued”.