The only important data on the U.S. economy released this morning is a report from the Federal Reserve Bank of Dallas which showed that business activity in the southern region of the country rebounded this month. Specifically, the general activity index lifted from -18.3 to -1.3 in July, a significant improvement but still the 19th negative (contractionary) print in a row. The production index, a key measure of state manufacturing conditions, also firmed in July (-7.0 to 0.4) and is now signaling expansion for the first time since April. Under the hood, measures of capacity utilization, new orders, shipments, capital expenditure plans, total employment, and hours worked all improved considerably this month. However, the gauge of wages and benefits fell sharply to the worst reading since 2013. This could be one of the ways that businesses are responding to increased margin pressures related to input cost inflation but it may also explain why more surveyed managers are complaining about poor labor quality. For example:
- Chemical Manufacturing
- Entry-level candidates cannot read or follow instructions. Most cannot do simple math problems. What is wrong with the educational system?
- Fabricated Metal Product Manufacturing
- There is a shortage of both skilled and unskilled labor. With labor costs increasing, we may be forced to drop health care, which is increasing in cost also.
- The ability to find qualified employees is our largest problem at this time.
- Textile Product Mills
- It is very difficult to get qualified employees.
Sources: Econoday, ZH, FRBD, FRBSLPost author: Charles Couch