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U.S. growth robust: Fed
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May 3, 2000: 2:27 p.m. ET
Central bank's periodic survey says lack of workers are fueling wage pressures
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NEW YORK (CNNfn) - The U.S. economy is surging ahead at a rapid clip, with a lack of available workers fueling pressure on companies to pay higher wages, the Federal Reserve said Wednesday. Still, competition between businesses and rising productivity is thus far keeping inflation under wraps.
In its periodic summary of economic conditions, the central bank said the U.S. job market remained very tight with "intensifying wage pressures as shortages of workers persisted." Still, even with faster wage growth for workers, "there were only a few reports that increases in input costs were resulting in higher prices at the retail level," the report said.
 The report affirmed for analysts what many already expect: that the Fed's policy making arm, the Federal Open Market Committee, will raise short-term interest rates again at its policy meeting in less than two weeks time -- and may raise its key rate even more aggressively than it has in the recent past.
With today's report, "the chance of a 50-basis-point rate hike on the 16th has been increased," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "The report is unequivocal."
The Fed's "Beige Book" is a survey of the economy conducted eight times a year and released two weeks before each of its monetary policy meetings. The report is generally used as a reference for officials in their deliberations about monetary policy and interest rates. Today's report was prepared by the Chicago Fed, and based on information collected before April 24.
 The Fed has raised rates five times since last June, upping its benchmark fed funds rate in quarter-point increments to slow the U.S. economy and keep inflation at bay. The fed funds rate -- the target rate that commercial banks lend to each other overnight -- is currently 6 percent. Fed officials will gather on May 16 in Washington.
The Fed's summary noted recent volatility in equity markets "had not had an impact on activity as of the time of the report," although it had altered the outlook for economic growth going forward. A severe plunge in the Dow Jones industrial average and tech-heavy Nasdaq composite index in March prompted some analysts to speculate that consumer spending, driven in part by the wealthy feeling created by appreciating stocks, may falter.
Retail sales remained robust, construction activity remained strong and manufacturing in most regions of the country remained solid, the report noted, though some areas showed signs of slowing. Prices for imported oil and other raw materials were rising, but were not generally being passed on to consumers.
"There were only a few reports that increases in input costs were resulting in higher prices at the retail level," the Fed said.
 As for the labor market, the Fed noted that "difficulty in finding and retaining qualified employees remained a common refrain in district reports as worker shortages persisted in every district, and in practically every industry and occupation. Many districts reported particularly severe shortages of workers in retail trade," the summary said.
On Thursday, the Labor Department will release its first-quarter productivity report. Analysts polled by Briefing.com expect that productivity had advanced at a 3.5 percent pace in the first three months of the year. And on Friday, the Labor Department will release April's employment data. Analysts expect that 325,000 new positions were added to the economy last month, pushing the jobless rate down one percentage point to 4 percent. 
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Federal Reserve
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