DISCLAIMER: Below are excerpts from the Federal Reserve Board's Beige Book published on September 7, 2011. It was "Prepared at the Federal Reserve Bank of Kansas City and based on information collected on or before August 26, 2011. 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)

Business contacts in the First District continue to report mixed results. Some manufacturers cite slowing demand while others continue to enjoy strong sales, retail activity is mostly flat, tourism is up, staffing and software and IT services firms note continued growth, and real estate markets remain sluggish. ...

Manufacturing and Related Services

Manufacturing contacts report relatively mixed business conditions, especially compared to the widespread favorable reports earlier this year. ... Semiconductor-related manufacturers in particular note declines in demand, although they attribute it to standard demand cycles for their products, given the surge in purchasing they saw in late 2010 and early 2011. ... A number of firms also note a slowdown in European demand for their products. By contrast, sales growth at pharmaceutical companies remains steady, and demand at various industrial supply manufacturers continues to be strong. Contacts at these industrial products firms note that they have little lead time between orders and sales and thus they would know very quickly if demand were slowing. Despite continued favorable conditions at some companies, nearly all manufacturing contacts voice concern regarding the current state of economic uncertainty and more than one commented that the country is "talking itself into a recession." Some respondents continue to postpone hiring and/or investment to keep costs low while others report having contingency plans in place should demand turn down noticeably.

Employment remains steady at the vast majority of contacted manufacturers. One exception is an industrial products manufacturer with headcount up 9 percent year-to-date who plans to continue to hire as long as demand for their products remains strong. By contrast, a semiconductor firm has eliminated some of its temporary workforce because demand for its products is off. A small number of manufacturers report continued difficulty finding workers for highly skilled positions.

Software and Information Technology Services
New England software and information technology contacts report that the upward trends of 2010 and early 2011 continued through the end of the second quarter. Year-over-year revenue increases, ranging from 4 percent to 30 percent, were driven by notable increases in both software license sales and recurring service revenues. Reports on activity since July are mixed, however, with some contacts experiencing downticks and others posting larger-than-expected increases. Headcounts continue to rise in line with revenue growth, although many contacts report increasing difficulty in finding qualified software engineers, programmers, and sales personnel. As a result, some have bolstered their recruitment efforts and one contact has added jobs overseas. Wages are steady or up slightly, with annual merit increases generally in the 3 percent to 5 percent range. Selling prices have been left unchanged as a result of a competitive market environment. The outlook among New England software and IT services respondents is not appreciably different from that of 3 months ago, with most expecting growth in late 2011 and early 2012 to be in the 10 percent to 20 percent range.

Staffing Services
Nearly all New England staffing contacts report upticks in business volume through the end of second quarter and into the third; however, many respondents lament that overall activity remains below expectations. Revenues are flat to increasing year-over-year, with increases in the range of 5 percent to 25 percent. Labor demand continues to strengthen, albeit modestly, with notable improvements in the manufacturing and information technology sectors. Demand for permanent and temporary-to-permanent hiring continues to grow; indeed, two contacts report that permanent placements are up more than 20 percent relative to last year. Notwithstanding stronger demand, jobs remain difficult to fill as clients remain fastidious in their candidate expectations. One contact notes that jobs that used to take just a few days to fill continue to take weeks. Supply of high-end labor remains tight in the region, but there has been no significant change since May. Bill rates and pay rates are steady. Looking forward, New England staffing contacts are generally less upbeat than they were three and six months ago, with many expecting to "move sideways" into 2012.

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

Economic growth in the Second District has remained sluggish since the last report. ...

Other Business Activity
Reports from business contacts point to some weakening in general business activity and steady to weakening conditions in the labor market. A major New York City employment agency reports that hiring activity has been unusually slow in August but remains cautiously optimistic that recruitment will pick up after Labor Day; financial firms, in particular, have become more hesitant and even hiring for compliance jobs has slowed. Separately, a contact in the securities industry reports that widespread layoffs are planned across the industry (though not entirely in New York City) and not all the weakness is related to the current market turmoil. There continues to be some hiring in compliance and technology, but layoffs now exceed hiring, on net.

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

Since the last Beige Book, business activity in the Third District has been more mixed and somewhat weaker overall. Several sectors have continued to report slow, steady growth, and a few sectors have grown faster, while others have shifted to reporting slower growth, no growth, or declines. Manufacturing activity has declined since the last Beige Book. ...

Services
Reports from Third District service-sector firms remain generally positive, but with greater expressions of uncertainty. A logistics firm described business as surprisingly strong--improving since the last Beige Book and better than last year. Staffing firms noted an increase in temporary hiring to fill permanent positions--indicating increased uncertainty among their customers. In addition to the impact from anticipated troop reductions, defense-related firms noted concerns stemming from the debt-ceiling agreement. While growth remains generally steady, greater uncertainty has crept into the generally positive outlook of service-sector firms.

Prices and Wages
 ... Since the last Beige Book, commodity price pressures have lessened somewhat on retailers, service-sector firms, and builders; however, margins remain very tight. But for a few business sectors or a few scattered rental markets, there are scant reports of upward pressure on rents and wages.

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

The economy in the Fourth District grew at a slow pace during the past six weeks, with many of our contacts downgrading their near-term outlooks. Manufacturers reported stable production but a decline in new orders and backlogs.  ...

... Staffing-firm representatives noted moderate growth in the number of new job openings, with vacancies concentrated in technical occupations and healthcare. Almost all openings were for experienced workers.

Manufacturing
Production at District factories was stable during the past six weeks, although reports indicated declines in new orders and backlogs. Many of our contacts expect additional slowing in demand, which they attributed to uncertainty and caution on the part of their customers. ... Hiring continued at a modest pace, with some manufacturers reporting difficulty in finding high-skilled workers. Wage pressures are contained.

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

Economic activity in the Fifth District slowed since our last report. Manufacturing activity pulled back markedly in August, following a sluggish July, and retail sales weakened. ... Labor markets were mixed; while temp services reported some improvement, employment remained nearly flat at manufacturing establishments.

Services
Non-retail services firms saw an uptick in revenues in recent weeks, according to most contacts. Stronger consumer demand for services was reported in telecommunications and healthcare, and a food distributor in the Baltimore area noted increased demand from locally owned restaurants and delicatessens. A financial data services firm reported improving demand from restaurants and retailers in Maryland and Virginia, although other business services providers noted negative ripple effects from a slower economy.

Labor Markets
Reports on Fifth District labor market activity were mixed in August. Several employment agencies reported somewhat stronger demand for temporary help in recent weeks, particularly in the healthcare and automotive industries. The branch manager of a temp agency in North Carolina stated that manufacturers had openings for skilled positions, but they had difficulty finding machine operators with at least one year of experience. Likewise, a contact from South Carolina reported that three large manufacturers in the area were trying to hire, but could not find qualified candidates. In contrast, an executive from the D.C. area said that a major corporation had initiated a hiring and advertising freeze. Also, a banker indicated that some of his clients said that they would rather pay workers overtime than hire new workers, due in large part to the recent environment of heightened uncertainty. According to our latest survey, job losses in the service sector were somewhat more widespread than in our last report; wages in the retail sector weakened on average, while average wage growth slowed at services firms. Survey respondents from most manufacturing industries indicated that hiring inched up over the last month, while the average workweek declined and wage growth slowed.

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

Sixth District business contacts indicated that economic activity continued to expand at a very subdued pace in July and August. ... Manufacturing contacts indicated that the level of production and new orders increased, but at a slower pace than experienced earlier in the year. ... Most businesses continued to be cautious regarding adding permanent staff, with several indicating that they had chosen to hire temporary or contract workers to fill immediate labor needs. Contacts reported that on average, sales prices were up slightly from a year ago, although some retailers mentioned that weak sales were prompting them to lower prices. Energy contacts indicated plans to increase oil production capacity.

Manufacturing and Transportation
Manufacturers indicated that the level of new orders and production increased in mid-July and August, but at a slower pace than earlier this year. A leading auto dealer and many parts suppliers felt that the impact of supply disruptions from Japan had ended. A large tire manufacturer noted particular pressure in meeting a recent surge in orders as the supply chain normalized from the disaster in Japan. Many manufacturers reported increased investment in technology equipment in efforts to increase efficiency. [note: this last sentence is identical to one included in the July Beige Book for this District. It could, or may not, be an editing error by the Sixth District. -- ed.]

Employment and Prices
Most businesses reported muted hiring activity. Many held the view that sales are the key factor in determining labor demand, and uncertainty about future sales seems to be exacerbating firms' unwillingness to commit to full-time employees. Hence, companies continued to hire temporary workers and contractors and are delaying longer-term projects. Many noted focusing on efficiency and productivity increases with existing staff to meet current or any seasonal increase in demand. Wage increases were reportedly subdued, with many business contacts opting for cash bonuses and restoration of benefits over annual salary increases.

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

Economic activity in the Seventh District expanded more slowly in July and August. Contacts expressed concern about the economic outlook, noting lower business and consumer confidence. Both consumer and business spending were little changed over the reporting period. Manufacturing production expanded at a slower pace, while construction decreased.  ...

Business Spending
Business spending continued at a slow, but steady, pace in July and August. Some manufacturers reported proceeding as planned with capital expenditures and labor force additions to alleviate pressures on capacity. In contrast, contacts mentioned that lower expectations for farm income had slowed purchases of farm equipment. Several contacts also noted closely watching inventory and staffing levels in the event that increases in uncertainty in the economic outlook and financial market volatility took a toll on demand. A retail contact indicated that holiday inventories will likely be higher this year because retailers had been very optimistic at the time the orders were made. Labor market conditions weakened, with hiring still slow and unemployment edging up in the District. In addition, a large staffing firm reported a decline in billable hours for staffing and professional services as well as fewer permanent placements.

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

The economy of the Eighth District has continued to grow at a modest pace since the previous report. Manufacturing activity has continued its increase since the previous report, and activity in the services sector also has increased. ...

Manufacturing and Other Business Activity
Manufacturing activity has continued to increase since our previous report. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants or reduce operations. Firms in the heating, ventilation, and air conditioning; art goods; packaging; bioscience; power hand tools; and sanitary paper products manufacturing industries reported plans to expand operations and hire new workers. In contrast, firms in the appliance and burial casket manufacturing industries announced plans to close plants and lay off employees.

Activity in the District's services sector has continued to increase since our previous report. Firms in scientific research, business support, health care, aviation, and automotive repair and maintenance services announced plans to expand operations and hire new workers. In contrast, a contact in the parking garage services industry reported plans to decrease operations in the District and lay off employees.

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

The Ninth District economy has grown slightly since the last report. Increased activity was noted in consumer spending, tourism, residential and commercial construction, residential real estate, manufacturing, energy and mining. ... Activity in commercial real estate and professional services was flat overall. Reports from labor markets include a mix of layoffs and new hiring, while wage increases remain moderate.

Services
On balance, professional business services firms reported flat activity over the past three months. A third of services firms that responded to the ad hoc survey saw increased sales, while a third saw decreased sales. Respondents noted that profits were also flat, but they expect increased activity over the next three months. An information technology company noted that July sales were down due to reduced demand from the government and financial services areas.

Employment, Wages, and Prices
Reports from labor markets include a mix of layoffs and new hiring. During a 20-day Minnesota government shutdown in July, 22,000 government employees were out of work. By delaying state funding and inspections, the shutdown also idled many construction projects across Minnesota. A bank recently announced plans to cut nearly 150 employees at its brokerage unit in Minneapolis. However, during July, Minnesota gained 8,200 private sector jobs. Minnesota auto dealers have started to hire more sales staff. About 11,000 new jobs related to oil drilling are expected in North Dakota, according to an announcement by a firm with operations there. According to the ad hoc survey, 19 percent of respondents expect to increase employment over the next three months, while 10 percent expect to decrease employment. A new fabrication plant in Montana will lead to 100 more jobs, and a sporting goods manufacturer in Minnesota announced plans to add 100 jobs over the next two years.

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

The Tenth District economy expanded modestly in late July and early August. ... Led by durable goods production, District manufacturing activity grew slightly, with expectations for stronger activity over the coming months. Despite solid multi-family building activity, residential and commercial construction remained weak. ... Wage pressures were confined to high-skilled positions, despite District unemployment rates well below national levels.

Manufacturing and Other Business Activity
Manufacturing and high-tech service activity expanded slightly during the survey period, while transportation activity edged down. Manufacturing activity expanded at durable goods factories, particularly those producing machinery and electronic products, offsetting weakness at non-durable goods plants. ... With increased activity, durable goods manufacturers hired additional workers, while non-durable goods factories reduced worker hours. After softening earlier in the summer, capital spending was expected to strengthen in coming months. The high-tech industry reported a modest increase in sales, but contacts were concerned that economic uncertainty could dampen demand. ...

Wages and Prices
Inflationary pressures softened during the last survey period as wage pressures remained low and fewer businesses expected to raise prices over the coming months. Most industries did not plan to raise wages, except for a few skilled positions, such as engineers, software developers, mechanics, and truck drivers. ... Builders and construction supply companies noted prices for construction materials generally held steady, with the exception of higher prices for petroleum-based products such as roofing shingles and asphalt. Transportation companies continued to pay high fuel prices, and some were considering raising rates.

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

The Eleventh District economy grew at a modest pace since the last report. Reports from manufacturers were mixed, and activity in the services sector rose slightly. The single-family housing sector remained weak, but activity in the multifamily sector was strong and the commercial real estate sector saw continued improvement. Financial services respondents said overall loan demand was flat during the reporting period. The energy industry continued to expand at a robust pace, while agricultural conditions deteriorated further in the District. Employment levels were stable at most responding firms and price pressures were unchanged.

Manufacturing
... Respondents in high-tech manufacturing report that growth in sales and orders weakened since the last report. Demand for basic memory products such as DRAM has weakened, while continued growth in demand for servers to store and process data has kept orders for microprocessors growing at a solid pace. Slow growth in Asia and increased uncertainty about the European and US economic outlooks has reduced business investment in high-tech products. The outlook for the next three to six months is for weak but positive growth.

Paper manufacturers reported that demand growth softened slightly during the reporting period, but remained better than last year's levels. Manufacturers of transportation equipment reported strong sales with demand flat to up since the last report and well above year-ago levels. Outlooks are optimistic, with contacts expecting demand to hold steady at current high levels over the next few months. Food producers reported a seasonal uptick in demand, but noted that they had seen a significant decline in overall sales compared with earlier in the year.

Petrochemical producers reported that after about six months of extensive plant outages, shortages of key materials, and dramatic price increases, resin and plastics markets have settled. Contacts said demand for most products remained good since the last report, with the exception of PVC products due to weak construction markets. Refiners said capacity utilization rates were the highest since 2007, and margins were strong based on good demand. Orders for oil products slipped in July, but strengthened again in August, according to contacts.

Services
Overall demand for staffing services held steady at high levels, although several firms noted slight declines in activity. One contact reported that temporary placements were being outpaced by direct hiring activity. Outlooks were more cautious than the previous reporting period, with contacts expecting demand to remain flat or decline through year-end. Demand for accounting services was flat, although contacts noted some strength in mergers and acquisitions activity. Legal firms reported continued solid demand for intellectual property, energy, IPO, and mergers and acquisitions services.

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

Economic activity in the Twelfth District continued to expand modestly during the reporting period of mid-July through the end of August. Upward price pressures were mixed but appeared to ease overall, and upward pressures on wages were subdued. ...

Wages and Prices
Upward price pressures were very limited on net during the reporting period. ...

Upward wage pressures were largely nonexistent, as compensation gains were held down by high levels of unemployment and limited demand for new hires. As a result of uncertain product demand, businesses in most sectors expect to remain highly cautious in regard to hiring for the foreseeable future, suggesting that compensation pressures are likely to remain subdued. However, contacts continued to report significant upward wage pressures for workers with advanced skills in technology fields.

Retail Trade and Services
... Sales expanded further for providers of technology services, as consumer demand for software, e-books, and mobile applications continued to grow. Providers of professional services such as law and accounting reported that demand was little changed from the prior period. Similarly, demand for transportation services was characterized as largely flat. For energy utilities, demand waned a bit during the beginning of the reporting period but improved later. Providers of health-care services reported that demand strengthened somewhat. ...

Manufacturing
District manufacturing activity was mixed but appeared to grow slightly during the reporting period of mid-July through the end of August. Although manufacturers of semiconductors and other technology products reported slower growth for new orders and sales, capacity utilization rates remained high and inventories were near desired levels given the pace of sales. For makers of commercial aircraft, significant increases in new orders for narrow-body aircraft combined with an existing order backlog to keep production rates near capacity. A metal fabricator noted that sales were "steady but slow" and raw materials were readily available. Petroleum refiners reported slightly weaker demand and capacity utilization rates that were largely stable, causing product inventories to rise somewhat. Demand held at very low levels for manufacturers of wood products.