Many parts of the country were hit by supply chain disruptions and labor shortages in November, the Federal Reserve reported Wednesday.
In a survey of business conditions around the country, the Fed's 12 regional banks found that the economy continued to grow at a modest-to-moderate pace, and the outlook for future growth remains positive.
But some of the Fed's some business contacts expressed uncertainty about when the problems presented by supply chain bottlenecks and labor shortages might begin to ease.
In part because of the supply chain problems, price increases were reported to be widespread across the economy.
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“There were wide-ranging input cost increases stemming from strong demand for raw materials, logistical challenges and labor market tightness,” the Fed's report, known as the beige book, said.
The Fed survey, which is based on interviews with business contacts last month in all 12 of the Fed's regional bank districts, will form the basis for discussions when central bank officials hold their final meeting of the year on Dec. 14-15.
In congressional testimony this week, Federal Reserve Chairman Jerome Powell said the central bank is prepared to speed up the pace of the pullback of the easy-money policies it has been using to support the economy for the past 20 months.
The Fed had been buying $120 billion in Treasury bonds and mortgage-backed securities since the spring of 2020. At its meeting last month, the central bank announced that it would start to trim those purchases, which serve to keep long-term interest rates low, by $15 billion in November and another $15 billion in December.
Powell's comments this week indicated the Fed may announce at its December meeting that it will make larger monthly reductions in the future so that the bond purchases can be totally ended earlier than the June end-date which had been expected.
That would clear the way for the Fed to begin raising its benchmark interest rate, which was reduced to a record low of 0% to 0.25% in early 2020.
Both the ending of the bond purchases and the start of interest rate hikes would be expected to raise borrowing costs for consumers and businesses as a way to slow the economy and fight inflationary pressures.
Powell made his comments as inflation has surged to a three-decade high, largely because the pandemic has limited supplies at a time when the re-opening of the economy has led to high demand.
The Fed report said that companies were complaining about “persistent difficulty in hiring and retaining employees” with many leisure and hospitality firms still limiting operating hours due to a lack of workers.
The report said businesses had heard a variety of reasons for the labor shortages. Those included the lack of childcare, retirements, and continued safety concerns revolving around the persistence of COVID cases. The survey was conducted before the emergence of the new omicron variant.
“Nearly all districts reported robust wage growth,” the Fed said. “Hiring struggles and elevated turnover rates led businesses to raise wages and offer other incentives, such as bonuses and more flexible working arrangements.”