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

Firms upbeat as summer’s strong demand drives growth across sectors Firms upbeat as summer’s strong demand drives growth across sectors

September 9, 2021

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, September 8, 2021

Summary of Economic Activity

Business activity continued to grow at a modest to strong pace in the First District in the Summer of 2021. Contacts across a wide cross-section of the economy reported strong demand. Residential real estate markets across the region continued to experience exceptional strength characterized by high prices and low inventories. One contact characterized the current situation in the semiconductor industry as a "golden age." Even in-store retail and restaurants in the region were upbeat. The main constraint on sales appeared to be shortages of parts and logistics problems. Supply issues have translated in some pricing pressure but mostly disrupted delivery of products and services. Labor markets remained very tight but employers complained more about unfilled openings than about high wages. Firms continued to be optimistic. Some contacts thought increases in demand were temporary but have revised their views.

Employment and Wages

Contacts continued to report tight labor markets with strong labor demand but limited labor supply and employment growth. Reasons varied. Some attributed this to expanded Unemployment Insurance (UI) benefits but others said that hiring was equally difficult for high wage workers and workers in states which had discontinued expanded UI. Contacts indicated that labor market tightness was most felt on the extensive margin, complaining more about an inability to hire at all versus having to pay higher wages. Some contacts said that pay equity across workers made it difficult to raise wages for new hires. Salaries for specific occupations have gone up with one contact saying that pay for logistics specialists had doubled since the start of the pandemic.


Contacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price. Firms did raise prices to offset higher costs but also said they tried to cut costs to maintain margins. Restaurants indicated that they were raising prices to cover higher costs.

Retail and Tourism

Retail contacts noted continued strength in apparel, home decor, salvaged goods, and online sales of home furnishings. Travel restrictions along the Canadian border have limited sales for some contacts. Online sales of home furnishings have remained well above pre-pandemic levels and revenue increased last quarter from the prior quarter, but year-over-year sales reflect a modest decline relative to the very strong sales last summer. In-store sales of home goods and apparel continued to rebound since the spring with same store sales up nearly 20 percent relative to summer 2019 in some cases.

Tourism and hospitality respondents noted strong restaurant sales throughout the summer, but they reported disruptions related to COVID-19 with some restrictions reinstated since the last round. Menu prices have continued to rise since the spring as food, delivery, and labor costs have all continued to increase in recent months. Higher menu costs have resulted in modestly larger tips for front of the house staff, and efforts have been made to increase wages across restaurants to attract more workers.

Manufacturing and Related Services

Most of our contacts reported higher sales versus the same period one year ago. Firms connected to the semiconductor industry reported exceptional strength with one referring to the current period as a "golden age" for the industry. A furniture manufacturer said sales were high by normal standards but low relative to the summer of 2020. Several contacts said that supply constraints limited growth. Specifically, they claimed that shortages and supply chain disruptions had a relatively small effect on prices but mostly affected their ability to make promised deliveries on schedule. Almost all contacts mentioned that logistics continued to be a problem. Most contacts said that they had limited price increases to customers and had dealt with higher input prices by cutting costs and increasing productivity. Hiring remained challenging. Contacts reported wage pressure especially for specific occupations. One contact said that pay had doubled for logistics specialists. Several contacts reported revising capital expenditures higher because of strong demand since the start of the pandemic. Contacts were generally optimistic although some had made downward revisions to their forecasts due to shortages of parts. Contacts expected supply disruptions to ease in 2022.

Staffing Services

Staffing firms reported strong performance during the summer months, with quarterly increases as high as 20 percent following a strong 2021Q1. Demand for labor remains high across all sectors and supply is tight. Contacts said clients were lowering their required qualifications and experience for job candidates and offering on-the-job training and opportunities for upward mobility. Reliability stands out as the primary concern for these employers. Pay rates remain elevated, and several contacts reported bidding wars to attract qualified candidates. While several contacts cited continued UI benefits as a cause of the worker shortage, other contacts cited childcare options as the primary obstacle. Pandemic-related health concerns remained an issue. Contacts were generally optimistic about their performance the rest of the year, with several firms expecting growth in labor supply as increased recruitment efforts continue and UI benefits expire.

Commercial Real Estate

Commercial real estate sales and leasing in the First District remains mixed with strength in industrial and life science while uncertainty continues to surround retail and office space. The industrial and life sciences markets continue to be characterized by high leasing demand with high rents and near-zero vacancy levels. Lack of availability has led to reductions in industrial and life science leasing activity in part of the district. Development and construction activity in these sectors have remained strong throughout the district but continue to be affected by high construction costs, and many new projects now incorporate an "escalation factor" into budgets. Contacts described slow and even "anemic" conditions in the office market—departing from greater optimism during the previous calling cycle. Concerns about the Delta variant has increased uncertainty and many tenants opt to sign short-term renewals only when necessary. Office rents remained mostly flat, with landlords continuing to offer some non-rent concessions. Sales activity continues to be limited in the office market, as office property owners prefer to wait rather than discount or sell their properties. Retail real estate activity is mixed with strong demand for grocery- and gas-anchored retail along with lifestyle retail and experiential restaurants. Contacts still hold generally optimistic outlooks, but also expressed greater uncertainty regarding the office and retail markets.

Commercial real estate lending and investment have been characterized by highly competitive and loose market conditions for warehouses, multi-family housing, and life sciences products. Banks and institutional investors, that are flush with cash and under pressure to invest, are driving robust price increases. In competitive final bidding rounds, price increases have been 10 to 20 times greater than in normal market conditions. Loan and capitalization rates alike have compressed by a further 5 to 25 basis points from the previous cycle.

Residential Real Estate

Low inventory continued to push prices upward in the First District's residential real estate markets in July. Sales levels for single family homes were unchanged or lower year-on-year and sales of condos were unchanged or slightly up. Inventory is down by double digit percentages for all reporting markets year-over-year but the inventory declines have moderated. Median sales prices are higher for all types of residential real estate but price growth has slowed slightly since last cycle. Contacts expect high demand to continue to outpace supply into the fall and winter for as long as mortgage rates remain low.


For more information about District economic conditions visit:

All Beige Book content going back to 1996 can be found at the Board of Governors website.

The Minneapolis Fed hosts the Beige Book archives by district, going back to 1970.