The Beige Book – First District The Beige Book – First District

Expectations up as most manufacturers, retailers, staffing firms see revenue increases Expectations up as most manufacturers, retailers, staffing firms see revenue increases

December 3, 2019

The Beige Book

The Beige Book is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.

Boston (First District) Beige Book Report, Nov. 27, 2019

Summary of Economic Activity

Business contacts in the First District cited mostly positive results when contacted in November. Both retailers and manufacturers reported modest to moderate increases in revenues compared with a year earlier, as did staffing firms. Reports from commercial real estate contacts were similar to the last round, with the greatest strength in the Boston market, while activity in Hartford was steady at a low level. Residential real estate sales and prices were up in most areas. Labor markets remained tight and staffing firms noted some substantial pay increases. Most responding firms cited a positive outlook, with some noting a recent upgrade in their expectations.

Employment and Wages

Labor markets remained tight in the First District even as business contacts cited modest expansion of headcounts in aggregate. Retail contacts reported having no problems hiring staff or having difficulty hiring only for selected positions. By contrast, several manufacturers noted that hiring was difficult and that labor costs had risen. At the same time, manufacturers reported no major positive revisions to hiring plans. Staffing respondents saw strong demand for labor and continued to experience tight labor supplies, particularly of highly-skilled workers. Most staffing contacts were able to increase bill rates and pay rates concurrently, ranging from 4 percent to 20 percent; one held both rates unchanged from the last quarter.


Business contacts had little to say about prices. Retailers mentioned no pressures and most manufacturing contacts reported no unusual pricing patterns. One exception was a dairy-products firm which reported raising their selling prices by 5 percent to recoup part of a 9 percent increase in input costs.

Consumer Spending

Retailers consulted for this round reported posting year-over-year comparable-store sales gains in the mid-single digits. Total revenue increases including expansion activity were in the high single digits or low double digits year-over-year. Sales expectations were optimistic for the holiday season and beyond. While the underlying trend in terms of economic fundamentals was reportedly strong, some contacts expressed concern about the impact of tariffs. One retailer reported that the intermediary firm that pays their import duties on some European luxury goods recently announced that the rates it charges will be going up significantly. Two other firms have reported tariff impacts on sales, either in terms of pricing or in terms of supply chain disruptions slowing their product supply.

Passenger traffic to Logan International was up 2.3 percent for domestic travel and up 11.1 percent for international arrivals year-to-date through September compared with a year earlier. Airlines have continued to add flights. The 2019 cruise ship season has ended with homeport passenger counts up 15 percent and port-of-call passenger counts up 33 percent compared to the 2018 season. Business and leisure travel were expected to remain robust into 2020.

Manufacturing and Related Services

Reports from eight manufacturing contacts were more positive in this round than in the recent past. In some cases, contacts reported their first year-on-year sales growth since 2018. However, part of the improvement reflects a weak comparison period a year earlier: The first half of 2018 was strong, partly because of tax cuts, but tariffs and general trade uncertainty contributed to weakness in the second half of 2018. A notable area of strength was semiconductors, which had been going through a down cycle that industry participants said was only partly attributable to global economic patterns; semiconductor industry cycles are often out-of-sync with the rest of the economy.

Two contacts reported positive revisions to their capital expenditure plans. One is a manufacturer of veterinary supplies which said, among other things, that swine flu had led Chinese producers to increase production of chickens, requiring purchase of new veterinary technologies.

Manufacturing respondents were positive about the near-term future and half said they had made upward revisions to their forecasts recently. Reasons varied. For a furniture maker, it was mostly a single large order from a new type of customer. For other firms, it was the trough in the semiconductor cycle.


Most New England staffing firms reported positive revenue growth in the third quarter of 2019, citing high single-digit year-over-year increases. Some expect healthy growth in the last quarter of 2019 as well. Job candidates often do not possess the skillsets and experience desired by employers, so staffing firms have augmented their training efforts. They have also increased their presence on online job boards and other advertising channels. A few respondents have expanded by hiring more recruiters and building specialized teams for retained search services or permanent placements. All staffing contacts expressed optimism for additional gains in 2020.

Commercial Real Estate

Commercial real estate activity in the First District continued to strengthen into November. Office leasing demand in Boston has been robust even as leasing activity has slowed because of extremely low vacancy rates. Construction activity was robust. The investment sales market has also been strong; according to one contact, total transaction volume increased by 18 percent from Q3 2018 to Q3 2019. The outlook for Boston was cautiously positive: All contacts reported that there were no signs of a growth slow-down and the commercial real estate market was well-balanced. However, one contact mentioned that they did not expect much price appreciation and had lowered their income expectations for the next five years.

The Providence area saw moderate commercial market activity. Office rents were flat, while one-off transactions (not robust activity) lifted rents in the industrial market. Demand remained moderate in the investment sales market. One contact expressed concern about growing political uncertainty.

In the greater Hartford area, commercial leasing activity levels have not changed since the last cycle. Absorption in the industrial market was low, and absorption in the office market was negative for 2019 to date. Retail stores continued to close. In the investment sales market, prices were steady and the number of bidders in the market has fallen slightly. Commercial real estate respondents said business sentiment was neutral in Connecticut.

Residential Real Estate

Residential real estate markets in the First District saw improvements in September. (Most areas reported year-over-year changes from September 2018 to September 2019; New Hampshire reported October statistics and Vermont reported August data. Connecticut statistics were unavailable.) For single family homes, closed sales and median sales prices were up in five reporting areas. Inventory generally decreased. For condominiums, sales rose moderately in all reporting areas except Rhode Island. Median sales prices dropped slightly in Boston, but increased or stayed flat in all other areas. Condo inventory improved in Boston and Maine but decreased in Rhode Island, Massachusetts, and New Hampshire. Vermont experienced a slowdown in closed sales and an increase in prices in August (data for Vermont combine single family homes and condos).

Contacts expected market activity to slow seasonally during the remainder of the year. The Maine and Massachusetts respondents both noted that the market for homes priced below $250,000 is very tight. Contacts expressed positive outlooks for the coming months, citing favorable mortgage rates as the main reason.


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