Beige Book: Tight Labor Market Blunts Vax Mandates

October 21, 2021

Forces tied to the global pandemic continue to shape economic activity across the Southeast, and the Federal Reserve Bank of Atlanta’s latest Beige Book report on economic conditions in the Southeast highlights two developments in particular.

First, most of the dozens of employers contacted by the Atlanta Fed said they would like to institute vaccine mandates but won’t for fear of losing employees in an already tight labor market. Second, several business contacts mentioned that rising living costs are increasingly factoring into wage negotiations.

Those findings came alongside numerous reports of implications of continued strong labor demand and a limited supply of available workers. For example, turnover increased broadly as people switched jobs for higher pay, more flexibility, and better work environments. And amid higher absenteeism rates caused by recent surges in COVID cases, several employers reported they’ve had to make daily decisions on which operations to continue based on the number of employees who come to work.

Meanwhile, in the residential real estate market, even as demand remained strong, affordability was a growing concern, which resulted in moderating sales growth and worsening sentiment among home buyers, according to the Beige Book. The decline in affordability was widespread but particularly acute in Central and South Florida.

In the multifamily housing industry, conditions improved notably during the past year. However, contacts reported growing uncertainty about the coming effects from the expiration of the federal moratorium on evictions.

In other economic sectors:

  • Hurricane Ida damaged energy infrastructure in the Gulf of Mexico. But some industry contacts said resiliency efforts since Hurricane Katrina in 2005—such as investments in diesel power generation—sped up the recovery. Ida affected people, of course, along with equipment. In fact, contacts said reduced oil and gas output was mainly attributed to challenges in redeploying workers as it was difficult—and in some cases, impossible—for them to reenter some coastal communities after the storm. Contacts also reported that reduced investment in oil and gas exploration and production in recent months could curtail supplies in the long term.
  • New Orleans has reopened after tourism plummeted following Hurricane Ida. Contacts in the Crescent City expect leisure and hospitality business to improve during the rest of 2021. Some contacts across the Southeast cited further deterioration in business travel and convention bookings because of rising COVID-19 cases and expressed uncertainty about the outlook for the next three months.
  • Manufacturing contacts reported strong demand. On the other hand, materials shortages and longer supply delivery times continued to slow production, and some firms noted more down time because of higher COVID-related absenteeism.
  • In transportation, contacts reported resuming cargo-only flights to bypass bottlenecks at seaports. Contacts expect gridlock at ports and other supply chain disruptions to continue into 2022.

The Federal Reserve publishes the Beige Book before each meeting of the Federal Open Market Committee. The next meeting is scheduled for November 2–3.

photo of Charles Davidson
Charles Davidson

Staff writer for Economy Matters