The U.S. economy grew at a modest pace in July and August as a strong labor market failed to put much upward pressure on wages and prices, a Federal Reserve report showed.
“In general, expectations of wage growth for the coming months were modest” and price increases “remained slight overall,” according to the Fed’s latest Beige Book release, a survey of business contacts published Wednesday in Washington.
While the job market “remained tight in most districts,” overall consumer spending was “little changed” from the previous report, it said.
Business contacts in real estate and construction mentioned concerns about the upcoming U.S. presidential election. “Contacts in several districts cited only modest expectations for sales and construction activity moving forward, due in part to economy uncertainty surrounding the November elections,” the report said.
The U.S. central bank’s policy-setting Federal Open Market Committee meets Sept. 20-21 to decide on interest rates, which have been held steady this year following a hike in December that marked the first in nearly a decade. Mixed readings on the U.S. economy throughout the year and sluggish progress toward Fed officials’ 2 percent inflation target have so far prevented another increase.
“Wage growth ranged from flat to strong across the districts, but most reported that wage pressures remained fairly modest,” the report said. Contacts in several districts “expect prices to increase modestly in coming months,” according to the report.
A government report last week showed hiring slowed in August, as employers added a net 151,000 jobs, and the unemployment rate was unchanged from a month earlier at 4.9 percent. Reports from the Institute for Supply Management on the manufacturing and services sectors showed a deceleration in business activity last month.
The Beige Book said “employment expanded at a moderate pace,” with tight conditions in Boston, Chicago, New York, San Francisco, St. Louis and Minneapolis. Boston in particular reported “an unusually high number of job openings,” and many districts said companies had difficulty filling job vacancies for high-skilled positions.
Investors see the chances of a rate hike this month as about one in 10, while the odds of a move before the end of the year are about even, according to the prices of federal funds futures contracts.
The Beige Book report, prepared by the San Francisco Fed, was based on information collected on or before Aug. 29. It is published eight times a year.