The tight U.S. labor market is continuing to ease, the Federal Reserve announced Wednesday, underscoring the progress it is making as it seeks to tackle inflation while avoiding a recession.
The Fed has raised interest rates to a 22-year high as it looks to tame high inflation, which remains stuck above its long-term target of 2%.
Nevertheless, price increases have slowed sharply since last year, while the economy has remained resilient, raising hopes of a so-called "soft landing," in which inflation is quashed through rate hikes without causing a damaging recession.
In its regular summary of economic conditions published Wednesday, the Fed noted "little to no change in economic activity" since its last report, along with "modest" inflation and a softening in the labor market.
"Labor market tightness continued to ease across the nation," the Fed said in its report, known as the "beige book."
Several Fed districts reported an improvement in hiring and retention over the last few weeks, despite "ongoing challenges in recruiting and hiring skilled tradespeople."
"Those receiving offers have been less inclined to negotiate terms of employment," the report continued, noting that firms were mitigating higher labor costs by allowing more remote work, reducing sign-on bonuses and "shifting compensation to more performance-based models."
While overall manufacturing activity was mixed, some districts reported growing concerns about the ongoing strike action over pay and conditions by the United Auto Workers (UAW) union against Detroit's "Big Three" auto makers.
This was the case in the Fed's Cleveland district, where steel producers "said some of their customers had been hesitant to place new orders out of concern about the ongoing UAW strike."
And in Chicago, one supplier said automakers "were willing to pay high prices to get necessary parts before a work stoppage."
The Fed is widely expected to hold interest rates steady at its next rate-setting meeting, which gets underway at the end of October.
Copyright 2023, Agence France-Presse