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

Growth continues at modest pace, tourism sees small gains and signs of accelerating demand Growth continues at modest pace, tourism sees small gains and signs of accelerating demand

April 21, 2022

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, April 20, 2022

Summary of Economic Activity

Economic activity expanded at a modest pace on average. Hiring remained difficult for most firms but eased for some, resulting in small employment gains. Wages increased at a moderate pace on average, but some firms offered robust pay increases. Output prices increased moderately amid intense cost pressures. Manufacturers reported softer sales, while retailers saw slightly higher sales. Tourism contacts enjoyed small gains in activity on average, and saw signs suggesting demand would accelerate in the coming months. Software and IT services firms posted moderate revenue growth and had generally robust demand. Home sales slid further amid historically low inventories. Commercial real estate activity increased at a slow pace as the office and retail sectors gained further momentum. The overall outlook remained optimistic on balance, but several contacts perceived an increase in downside risks.

Labor Markets

Wages increased at a moderate pace on average, hiring activity was mixed, and headcounts increased modestly despite significant layoffs by one large firm. Most contacted firms in diverse sectors continued to face difficulties in hiring and/or retaining workers, but some experienced an easing of labor shortages in recent months. Moderate to robust wage increases were reported by the majority of firms contacted, but some manufacturers said wages were stable in recent months. One retailer increased its wage floor further following a similar increase posted in Q4 2021, and two firms quoted their starting pay for warehouse workers as having risen to roughly $18 per hour. Retention bonuses and non-wage incentives also increased. Regarding the outlook, software and IT services firms expected to either maintain or moderately raise employment levels moving forward, retail and tourism contacts hoped to raise staffing levels by modest to robust margins, and manufacturers' hiring plans were mixed but positive on balance. Some firms expected upward wage pressures to persist, while others saw the possibility of slower wage growth ahead.


Output prices increased moderately amid robust ongoing cost pressures. Two software and IT contacts marked up their prices significantly and were either planning on or considering further price increases moving forward; other IT firms held prices firm, but one was mulling selective increases. Manufacturing contacts faced robust-to-extreme inflationary pressures across a variety of inputs, including food commodities, fuel, freight, metals, and paper. One held prices steady despite these pressures, as they feared that further price increases, on top of the substantial markups they enacted in 2021, would drive away customers. Two others raised prices on some or all outputs, by modest-to-strong margins, to cover specific cost increases. One firm lowered prices following weak sales. Retailers experienced somewhat slower input price inflation and held prices steady, although one planned to post moderate price increases later in the year. The war in Ukraine injected greater uncertainty into the inflation outlook among some contacts.

Retail and Tourism

First District retailers reported stable to modestly higher sales in the first months of 2022. At a clothing retailer, recent sales either matched or exceeded their year-ago levels, which had been among the store's strongest on record. A furniture seller saw a modest uptick in sales since mid-February following a slow start to the year, thanks to improved supply chains and increased foot traffic. Tourism contacts reported mixed recent results but expected the recovery to pre-pandemic activity levels to accelerate moving forward. Airline passenger traffic through Boston rose at a fairly brisk pace in recent months, and as of March 2022 had reached 80 percent of its March 2019 level. Advance bookings for April showed moderate further gains, and improvements were seen in all types of travel. Greater Boston hotel occupancy rates and room rates were moderately lower in February compared with November 2021 from a combination of seasonal and pandemic-related factors, but both rates remained well above those from one year earlier. Retail and tourism contacts expressed an optimistic outlook for the rest of 2022, as the resumption of long-dormant convention activity in Boston—already apparent in March—was expected to give renewed energy to the sectors.

Manufacturing and Related Services

Among firms contacted this round, sales softened on average despite mixed demand conditions. A biotechnology firm and a precision parts maker each suffered idiosyncratic (negative) shocks to demand, resulting in flat or lower sales for the quarter and steep revenue declines from one year ago. A frozen fish producer and a packaging maker both said that, despite very robust demand, sales fell from last quarter owing in part to supply chain issues. A furniture producer saw a moderate increase in sales in the first quarter but noted that sales growth was held back by supply chain delays and labor shortages. Contacts experiencing strong demand wanted to invest in new capacity but said that supply chain issues limited their ability to do so. With the exception of the biotechnology firm, contacts were generally optimistic. Nonetheless, material and labor shortages remained a risk for some, and others faced increased uncertainty tied to government spending and sanctions on Russia.

Software and IT Services

Software and IT contacts experienced moderately higher demand recently, and revenues increased by robust margins year-over-year. One firm experienced a recent surge in hiring, compensating for previous staffing challenges, while others said that hiring and retention remained quite difficult. All firms made at least selective wage increases, and wage growth accelerated to a robust pace at two firms. Wage pressures crimped margins at one firm, but others enjoyed stable or higher margins following recent price increases and/or cost-cutting measures. Capital and technology spending was steady or up slightly. Demand outlooks were generally optimistic, but uncertainty increased. The Russia-Ukraine war worried two contacts, but so far neither firm has been significantly impacted by the conflict. Other risks mentioned included supply chain issues, inflation, and the emergence of a new COVID-19 variant.

Commercial Real Estate

Commercial real estate activity increased at a modest pace on average as the office and retail sectors gained further momentum. The industrial property sector continued to see very strong leasing and investment demand, driven by e-commerce users. Industrial space remained very tight, spurring robust increases in planned development. Office leasing activity increased further, especially in suburban locations. A Boston contact said that urban tenants were seeking short-term leases given their uncertain space needs, and that landlords were competing with space upgrades more than with rent reductions. The same contact, however, said that real estate professionals in the Boston area were forecasting declines in office rents in the next year. Multifamily housing saw robust investment demand and construction activity, as low vacancy rates contributed to steep rent growth. Retail leasing improved on balance, surprising some contacts, but the number of vacant storefronts remained elevated. Despite some optimism for the next few months, the outlook turned more pessimistic and uncertain, as contacts saw risks to activity from rising construction costs and interest rates, the war in Ukraine, and a possible recession.

Residential Real Estate

Residential real estate sales slowed moderately in February, as the market was dogged by historically low inventories. Closed sales were down over the year (to February) for both single-family homes and condominiums in all states except Connecticut, which did not supply data. Year-on-year sales declines were somewhat steeper than those recorded in late 2021. Contacts attributed the weak results to a stark lack of inventories, as listings again posted year-over-year declines and reached record lows (since 1998) in Rhode Island and in the Boston area. Buyer demand remained strong, however, as properties spent very little time on the market and competition for lower-priced homes was especially fierce. Median sales prices continued to climb at a moderate to very fast annual pace, similar to the results recorded in late 2021, with the exception that Maine's condo prices fell. Contacts expected inventories and sales to increase in the coming months in line with typical seasonal patterns and due to the further easing of pandemic-related restrictions. Contacts noted that buyers wished to purchase homes ahead of further mortgage rate and price increases.


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