Fed survey sees less hiring, rising pay

Job growth in Arkansas and surrounding states will likely slow, though not decline, for the remainder of the year, the Federal Reserve Bank reported recently in a regional analysis of economic conditions. Over the same period the Fed projects employers will continue to increase wages to attract and retain workers.

While the Fed analysis did not include specifics on hiring and wages in Arkansas, patterns in the state generally follow the overall findings, according to Nathan Jefferson, the regional Fed economist who led the study. “Efforts to increase wages to retain employees and efforts to increase wages to get new employees would be true in Arkansas as well,” he said.

Northwest Arkansas, however, rises above the region with robust economic growth and plans for hiring and wage increases remaining strong.

“Northwest Arkansas has seen really, really strong growth, even more so than the district as a whole,” Jefferson said.

The December survey asked companies in the Fed’s seven-state 8th District about their plans for this year, focusing on wages and hiring.

The majority of companies said they will continue to raise wages for new hires and current workers though not as much as in 2021, which registered the highest level of pay increases since the survey began in 2014. “We saw some really strong wage pressures in 2021,” Jefferson said.

In the survey, 70% of companies indicated they would increase pay to attract new workers and 47% reported they intend to raise wages for most current employees.

“That number for last year is still well above historical norms,” Jefferson said, pointing out that the share of employers raising wages for both sets of workers never exceeded 40% before 2021. “We saw some of the wage pressure slow a little bit in the second half of 2022. Firms were able to get the kinds of workers that they wanted.”

Labor shortages have been prevalent in Arkansas and across the nation since the start of the pandemic, pushing companies to raise pay and benefits to keep and attract workers. Nevertheless, shortages remain and the U.S. Chamber of Commerce reported last month that the transportation, food and accommodation, health care and retail sectors continue to struggle to fill open positions.

Economic uncertainty and fears over of a potential recession led employers to project slower job growth this year, the Fed analysis found, as businesses indicated they would take a more cautious approach to hiring.

The report said that 32% of companies planned to add workers this year and 55% said employment would be flat. “This was the lowest share of firms expecting an increase in employment levels since 2014,” the report said. In 2021, about 64% of employers said they would add jobs.

Since the December survey, there seems to be more optimism among employers so far in 2023 as economic concerns appear to have eased, Jefferson said, adding that a fuller study would be available when the Fed releases its Beige Book economic report in March.

“The data is shifting a lot from month to month,” Jefferson said.

Job increases are being fueled in part by sales growth and by “overworked staff,” the Fed said. About 72% of companies reported staff that is called on to do too much — above the historical average of 59% from 2015-2020.

The Fed’s 8th District includes all of Arkansas and southern Illinois, southern Indiana, western Kentucky, northern Mississippi, eastern Missouri and western Tennessee. Major metropolitan districts are Little Rock, Louisville, Memphis and St. Louis.