DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on March 3, 2010. It was "Prepared at the Federal Reserve Bank of Kansas City and based on information collected on or before February 22, 2010. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials."

The excepts were chosen for their relevancy to the recruitment, staffing, employment services and IT services sectors. The inclusion or exclusion of any sections or wording, the inclusion of each District's service areas (note that sections of some states are divided and end up in more than Fed District), as well as emphasizing certain sections with special typefaces (e.g. bold-faced) was done solely at the discretion of brucesteinberg.net. The full report can be found at the Federal Reserve Board.

First District -- Boston (CT, MA, ME, NH, RI & VT)

Software and Information Technology Services

First District contacts in the software and information technology sectors largely report increased activity -- ranging from slight upticks to significant growth -- through the end of Q4 2009 and into Q1 2010; however, a few respondents caution that business conditions remain fragile and unpredictable. Contacts generally report increased demand across the board, including the financial, medical, and government sectors, although some corporate clients remain hesitant to spend money. One contact also notes that pricing pressure from competitors remains aggressive. While some firms have reduced headcount in recent months, others continue to add personnel; however, salary freezes from 2009 have been lifted, with anticipated merit increases generally in the 3-percent to 5-percent range. The outlook among New England software and IT contacts is more positive than in prior months, with 2010 largely expected to be a growth year. Despite these improved expectations, the possibility of a double-dip recession or a slow recovery remains a major concern.

Staffing Services

The majority of New England staffing contacts report that business continues to strengthen, although a few have experienced stagnant or volatile activity over the past three months. Yearly revenues for 2009 were generally 10 percent to 30 percent below 2008 revenues; however revenues continue to rise over-the-quarter. Labor demand has generally increased across industries, with notable improvements in the financial and manufacturing sectors. Increased activity is also reported in the medical, aerospace, and semiconductor industries. While the demand for direct hires remains depressed, several contacts noted increased conversion of temporary workers to permanent status. Labor supply remains plentiful, although candidate skills do not always meet client demand and an elongation of the hiring cycle persists. The downward pressure on bill rates throughout 2009 has lessened, and some applicants are no longer willing to accept lower pay rates. All First District staffing respondents anticipate improvement during 2010, with most expecting growth for the year to be in the 10-percent to 20-percent range.

Second District -- New York (CT, NJ & NY)

Other Business Activity

A major NYC employment agency, specializing in office jobs, reports that hiring activity has been sluggish but stable in early 2010, in contrast with the modest pickup that seemed to be taking hold in late 2009; still, conditions are reported to be not as bad as during most of 2009. There has been some pickup in hiring in the legal industry, which had been exceptionally weak. However, there is only scattered hiring in the financial sector, and mostly at smaller firms. Separately, a securities industry contact indicates that the pace of layoffs has slowed to more normal levels, giving greater job security to those still employed; nevertheless, firms are reluctant to hire in many areas due to uncertainty about both the economic and regulatory outlook.

Third District -- Philadelphia (DE, PA & NJ)

Manufacturing

Third District manufacturers reported increases in shipments and new orders, on balance, from January to February, with the number of firms posting gains exceeding the number recording declines by a fair margin. The improvement was also widespread, as most of the major manufacturing industries in the region posted increases. Comments from manufacturers indicated that their customers are beginning to step up orders after a period of slow activity. One contact said that "for the first time in 16 months there is slight optimism among our customer base," and another said that "we are ramping up to handle a few large projects."

Services

Service-sector firms generally reported that activity has been about steady since the last Beige Book. Some indicated a slight strengthening in demand for their services, which some described as only "stabilization" or "an uptick." Some engineering firms noted that they have had increases in demand for work related to energy conservation and efficiency, but other construction-related activity continued to be very weak. The region's service-sector firms expect slow growth, at best, in the near term. One noted that "clients are starting to talk about projects they have had on the shelf, but they're not doing anything yet," and another said, "We continue to be cautious."

Fourth District -- Cleveland (KY, OH, PA & WV)

Labor markets are beginning to show a slight recovery, with some business owners recalling a few workers or increasing production hours. Staffing-firm representatives reported an increased number of job openings, especially in healthcare and, to a lesser degree, in manufacturing. Wage pressures are contained.

Transportation

Capital spending is expected to increase somewhat on a year-over-year basis, but remain significantly below pre-recession levels. A few contacts noted that they plan to allocate monies for IT equipment.

Fifth District -- Richmond (MD, NC, SC, VA & WV)

Labor Markets

Labor markets generally softened across major sectors in the Fifth District. Employment and hours at manufacturing firms on average continued to decline over the past month, while retail and service-providing industries reduced hiring but increased hours. Employment was held back, according to one manufacturing contact, by productivity improvements initiated earlier in the recession, and another manufacturer stated that temporary layoffs were continuing due to weak demand. However, temporary employment agents reported somewhat stronger demand during January and February than in previous months. One agent cited a slight increase in demand for contract workers in manufacturing, although construction-related suppliers continued to struggle. Most of the gains in temporary hiring were in service-related occupations, such as finance and other professional services.

Sixth District -- Atlanta (AL, FL, GA, LA, MS & TN)

Employment and Prices

Temporary help agencies continued to report an increase in job orders in January and early February. However, unemployment remains high across the District and job creation remained tepid. Businesses continued to describe attempts to do more with less, such as combining the duties of several jobs into one.

Seventh District -- Chicago (IA, IL, IN, MI & WI)

Business Spending

Business spending also increased slightly from the previous reporting period. Contacts indicated that inventories were currently being restocked only as needed to keep up with demand. Several manufacturing contacts questioned the sustainability of any further inventory accumulation, pointing to uncertainty surrounding the economic outlook, volatility of materials prices, and tighter credit as forces keeping inventories lean. Most contacts, however, thought that these factors would at worst only serve to delay the rebuild in manufacturing until the second half of the year. Labor market conditions improved somewhat in January and February with layoffs declining and the workweek increasing. In addition, the demand for temporary workers remained strong with a large staffing firm reporting that billable hours increased substantially, particularly from the manufacturing sector. Permanent hiring continued to be slow, but contacts indicated some improvement in demand in information technology, healthcare, sales, and financial services.

Eighth District -- St. Louis (AR, KY, IL, IN, MO, MS & TN)

Manufacturing and Other Business Activity

Manufacturing activity increased since our previous survey. More contacts reported plans to expand or start new operations and increase employment than contacts who reported that order volumes remain slow and that they have no plans to expand employment. Several firms in auto parts manufacturing reported an increase in new orders and are expanding operations and hiring new employees accordingly. Firms in aerospace products; furniture; cosmetics; and heating, ventilation, and air conditioning manufacturing announced expansion plans. Firms in plastic products and fabricated metal products also announced plans to open new plants in the District and expand employment. In contrast, a smaller number of firms reported that order volumes remain slow and anticipate negative effects on employment. A firm in animal slaughtering and processing announced that it will close its operations, resulting in a large number of job losses.

Employment in the District's service sector contracted since our previous report. Several contacts in business support services announced layoffs. Similarly, firms in transportation/warehousing and medical services announced large job cuts. A firm in the leisure/hospitality business declared bankruptcy, resulting in a large number of seasonal job losses. In contrast, two firms in medical services announced an expansion in their local regions, with new facilities and additional hires.

Ninth District -- Minneapolis (MI, MN, MT, ND, SD & WI)

Services

Overall activity increased in the professional business services sector since the last report. Contacts from information technology firms reported solid orders but noted some difficulties in collecting fees. Web development firms reported improved activity with backlogs ranging from a few weeks to a few months. A contact from a health care firm indicated that demand for core services was solid, while orders for elective procedures were soft. A bank director noted that legal fees were flat to down from a year ago. A Minnesota architectural firm's recent revenue was lower than a year ago.

Employment, Wages, and Prices

Softness in labor markets continued, but the pace of weakening has slowed. Minnesota unemployment insurance claims were up about 3 percent in January compared with a year earlier; however, increases in unemployment insurance claims have leveled off during the past three months. A medical insurer in Minnesota recently announced plans to lay off 150 employees, while a financial firm announced plans to cut 25 positions in South Dakota. By contrast, a business that processes employee applications in Minnesota will hire an additional 50 employees, and a bank recently announced plans to hire more brokers.

Wage rates remained stable. A Montana bank director noted that most business contacts in his area expect no increases in wages or benefits in 2010.

Tenth District -- Kansas City (CO, NM, MO, NE, OK & WY)

Manufacturing and Other Business Activity

The Tenth District's manufacturing and transportation sectors expanded further, although high-tech firms reported weaker business conditions. District manufacturers reported increased production, shipment volumes, and new orders in the latest survey period. District manufacturing activity has increased steadily since last September and production has returned to near year ago levels. Manufacturers remained optimistic that new orders would be higher in six months; however backlogs were minimal and well below year ago levels. Few manufacturing firms increased hiring, though expectations for future hiring improved markedly in the latest survey period. Transportation firms reported a strong cyclical rebound in business activity consistent with continued stabilization in overall District activity. High-tech firms noted weaker business activity along with subdued expectations for improved business conditions in the coming quarter. Current and future expectations of capital spending activity among high-tech firms also diminished in the survey period. The lack of venture capital funding remained a concern for high-tech companies, especially among alternative energy and software development firms.

Eleventh District -- Dallas (LA, NM & TX)

Labor Market

Most respondents noted steady employment levels. Still, there were scattered reports of layoffs at selected retail, high-tech, emergency vehicle and construction-related manufacturing firms. On a positive note, staffing firms continued to report increased hiring activity. In addition, there were reports of an uptick in staff levels at some energy service, food, high-tech and transportation manufacturing firms.

Wage pressures were nonexistent. A few firms reported they either had already given, or planned on giving small pay increases to employees this year. In contrast, real estate contacts noted that people were taking jobs at reduced salaries.

Manufacturing

High-tech manufacturers report continued strong growth in orders and production. Demand for semiconductors remains solid, and respondents say they are struggling to keep up with demand. Inventories are at very lean levels, and most contacts expect demand to remain robust over the next three to six months.

Services

Staffing firms report continued improvement in demand. Orders are streaming in at a solid pace and billable hours are up. Demand is still largely for contract work, but direct hire placements have recently picked up from low levels. Staffing industry contacts were more upbeat in their outlook compared with the previous reporting period.

Twelfth District -- San Francisco (AK, AZ, CA, HI, ID, NV, OR, UT, & WA)

Wages and Prices

Upward price pressures were very modest on net during the reporting period. Commodity prices were stable or down in general, with declines noted for natural gas, copper, and aluminum. Weak demand continued to hold down prices for various services and most retail items, with extensive discounting reported for the latter. Nearly three-fourths of respondents anticipate that prices for the goods and services sold in their respective industries will remain largely stable during 2010; of the remainder, the number expecting declines was slightly higher than the number expecting increases.

Contacts in most sectors characterized wages as essentially flat, although some businesses reported significant increases in the costs of employee benefits, especially for health insurance. Upward wage pressures were limited by high unemployment and restricted hiring in most sectors and regions. An overwhelming majority of respondents expect no change in their firm's employment counts for at least the first half of the year, and they expect limited hiring to hold down wage pressures going forward.