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Economy strong, says Fed
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March 8, 2000: 3:27 p.m. ET
U.S. central bank's survey says economy in 'appreciable expansion'
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NEW YORK (CNNfn) - The U.S. economy continues to show signs of "appreciable expansion," buoyed by strong consumer spending and robust manufacturing output that continues to bolster demand for workers and place pressure on businesses to pay more, the Federal Reserve said Wednesday.
In its first survey of the U.S. economy this year, the central bank said the U.S. job market remains "very tight," with widespread labor shortages driving up wages. Still, even with faster wage growth for workers, "increases in the prices of final goods and services were limited overall," with the exception of transportation and commodities such as oil and natural gas.
"The majority of districts reported strong growth during the survey period, with the remaining reports pointing to moderate growth or continued high levels of activity," the Fed said. In addition, "most districts reported tight supplies and upward wage pressure for various types of labor, both skilled and entry level."
"The March Beige Book paints a clear picture of an economy straining at the seams," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "Significantly, compared to recent Beige Books, there was more detail, and a more worrying tone, to the comments on the labor market."
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 San Francisco Fed, and based on information collected before Feb. 29.
Rate rise coming
The report augmented remarks made by Fed Chairman Alan Greenspan earlier this week. Speaking in Boston Monday, the Fed Chief said the central bank must keep "vigilant" in ensuring that the robust U.S. economy does not begin to fan inflation. His comments reaffirmed for most investors that another quarter-percentage-point increase in short-term rates is on the way.
Fed officials meet March 21 to discuss the current state of the U.S. economy and whether interest rates should be raised again to slow the pace of growth. The central bank's bellwether Fed funds rate currently is 5.75 percent; it has been raised four times since last June.
The report focused on robust consumer spending, noting that retail sales "generally met or exceeded retailers' expectations for the period." Consumer electronics, appliances and home furnishings led the way as the items in most demand, the Fed said. As for manufacturing, the Fed noted that demand for semiconductors and related high-tech equipment were particularly strong, though tight supplies of those products had eased.
Computer services and other non-financial services firms recorded brisk business in the latest period, "with newly created Internet firms reportedly spending large sums on advertising campaigns in the San Francisco district," the report said. Construction activity also remained robust, "though cooling was evident in some markets," it said.
Tight labor market
Of particular note was the tight labor market. The Fed noted that labor markets were "very tight in most areas, and wage pressures increased for some worker groups." In addition, reports of "recruitment obstacles" were widespread, with some companies responding to the lack of skilled workers by recruiting senior citizens and teens and dishing out more overtime. To offset paying higher wages, however, many companies compensated their workers with perks and bonuses rather than higher wages, the Fed said. 
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Federal Reserve
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