WASHINGTON - The U.S. economy showed some signs of rising wage pressures in September and early October but overall compensation growth remained modest, the Federal Reserve said on Wednesday, a further sign of the cloudy outlook facing Fed policymakers as they mull a rise in interest rates.
"Wage growth held fairly steady at modest levels, although some districts reported rising pressure for certain sectors," the Fed said in its Beige Book report of anecdotal information collected from business contacts nationwide.
The U.S. central bank also said that most districts reported a modest or moderate pace of economic expansion and consumer spending was mixed.
Policymakers have been keenly watching for signs of increasing wage pressures spurred by an unemployment rate that now stands at 5.0 per cent.
After its policy meeting in September, the Fed indicated it would likely raise its benchmark interest rate by the end of the year providing employment and inflation continue to strengthen.
Inflation has been stubbornly slow to rise. In its report, the Fed noted that overall price growth remained mild, despite tight labor market conditions across most districts.
However, the Philadelphia, St. Louis and San Francisco regional Feds said their districts were experiencing wage pressures due to a shortage of available workers.
In the Boston district, "the competitive labour market also caused retail and tourism contacts...to raise wages" while employers in New York were "increasingly willing to negotiate compensation."
The San Francisco Fed said some small business owners also reported the need to reinstate dropped healthcare benefits in order to attract job-seekers.
The Boston Fed said contacts in several sectors cited uncertainty surrounding the upcoming presidential election as a reason for delaying some business decisions.
The Fed has held rates steady since an initial lift-off from near zero last December, in part due to a lack of inflation pressures. Inflation is currently 1.7 per cent, below the Fed's 2 per cent target rate.
The Beige Book was compiled by the Dallas Fed with information collected on or before Oct. 7, 2016. The Fed's next policy meeting is in two weeks, although investors next see a rate hike at the December policy meeting.