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, March 6, 2024

Summary of Economic Activity

Economic activity increased at a slight pace amid modest employment growth and only minor price increases. Retail sales were about flat on balance, while restaurants had a slower-than-usual January, and hotels reported stable activity. Manufacturers and staffing firms alike reported modest revenue growth. Residential real estate showed signs of positive momentum, as pending home sales increased modestly of late and by significant margins relative to one year earlier. Commercial real estate activity was flat on average. On balance, the outlook was cautiously optimistic, with many contacts expecting activity to increase in the second half of 2024. The exception was the outlook for commercial real estate, which remained relatively weak—especially for the office sector—though it did not worsen any further.

Labor Markets

Employment increased modestly amid mixed hiring activity, and wage growth was moderate on balance. Restaurant employment increased moderately in response to an easier hiring environment and an increased willingness of existing workers to expand their hours. Retail headcounts were stable, except for the shedding of temporary seasonal hires. Manufacturing employment increased slightly overall, as one firm added staff at a modest pace, and others kept headcounts fixed. Wages increased at a moderate (but stable) pace for restaurant and retail workers. Manufacturing wages increased at a somewhat elevated pace, and one firm sought to offset wage pressures with efficiency gains. Wages in the health-care sector were about flat recently. Hiring frictions eased for most contacts in most sectors, but one manufacturer struggled to fill open positions. Staffing industry contacts saw ongoing declines in sign-on and retention bonuses, as well as a trend away from remote work arrangements—all of which pointed to an increase in employer bargaining power. A workforce development contact said that transportation and childcare costs continued to present barriers to employment among candidates for entry-level positions. Looking ahead, hiring plans for the rest of 2024 called for only modest increases in employment, and wage increases were expected to be moderate.

Prices

Prices were up slightly on average according to First District contacts. Retailers held sticker prices steady. Restaurant prices were on average flat in early 2024, following a series of above-average menu price increases in 2023. Average daily room rates at Boston area hotels were up three percent on a year-over-year basis, a pace that was down considerably from the first half of 2023. Among manufacturers, more than half held output prices fixed, and others enacted moderate price increases. Most manufacturers reported no changes in their input prices, although some experienced modest declines in the prices of freight and gasoline, and one noted moderate input price increases. The outlook across sectors called for only small output price increases on average as most firms expected pricing pressures to be minimal. One firm nonetheless expected to face further moderate pricing pressure based on ongoing increases in labor costs.

Retail and Tourism

Retail and tourism sales were slightly weaker on balance in January, even net of seasonal factors, although results were mixed. A clothing retailer experienced a weaker-than-expected holiday season, posting a moderate decline in sales from one year earlier, with the slowdown attributed in part to the firm's earlier price increases. A discount retailer saw further modest improvements in sales led by increased purchases of basic home supplies. A Massachusetts restaurant industry contact reported an exceptionally weak January—attributed to the growing popularity of "Dry January" and other New Year's resolutions—but also noted there was a marked rebound in February to date. Hotel occupancy rates in Greater Boston were stable net of seasonal patterns and maintained a stable year-over-year growth pace of four percent. Restaurants were optimistic for the rest of 2024, and retailers were at least cautiously optimistic. However, contacts in both types of business emphasized that demand would continue to be marked by a high degree of price-consciousness.

Manufacturing and Related Services

Revenues increased modestly on average among First District manufacturers contacted this round, although demand conditions varied. A consumer-goods maker experienced a stronger-than-expected increase in sales for the holiday season, while a furniture maker had a modest seasonal uptick that nonetheless left sales below their year-earlier levels. One high-technology manufacturer faced declining sales of COVID-related products but maintained steady and modest revenue growth from other sources, while another experienced slightly softer sales because of unexpected weakness in automotive-related demand. Capital expenditures were mixed, increasing slightly on balance. According to contacts, plans for 2024 called for either similar or somewhat higher spending relative to 2023. The outlook was mixed but optimistic on balance, and only one firm expected sales to decline in 2024. A few firms expected the second half of the year to bring stronger demand compared with the first half.

Staffing Services

First District staffing firms reported modest revenue growth on average. Nonetheless, revenues and profit margins fell slightly for a firm that specializes in staffing to the health-care industry. Temporary and temp-to-hire roles became more common at the expense of direct hires, reversing a pandemic-era trend. Contacts anticipated modest revenue growth on average for the coming quarter.

Commercial Real Estate

Commercial real estate activity in the First District was stable in recent weeks. Industrial leasing held steady at a decent pace, and vacancies remained low. In the office market, leasing activity posted a slight uptick in Providence and moved sideways at a slow pace elsewhere, while vacancy rates were unchanged. Retail leasing and vacancy rates were stable, but contacts noted that deals were taking longer to accomplish. Rental rates were mostly flat across property types, excepting a slight decline for Boston-area industrial spaces. No major new construction was reported aside from projects already underway. The outlook was mixed across sectors. Retail activity was expected to hold firm in the near term and possibly improve later in 2024, while industrial activity was seen as softening further. Office market prospects remained weak, as leasing demand was expected to stay tepid, and credit to stay tight, amid ongoing uncertainty over the fate of office loans maturing in 2024. Nonetheless, the office outlook did not worsen since the previous report.

Residential Real Estate

First District home sales appeared to turn a corner in recent data, as pending sales picked up modestly in January from late 2023 and increased by moderate margins from one year earlier on average. Even though closed sales (for both single-family homes and condos) declined again on a year-over-year basis to January in most New England states, New Hampshire reported moderate increases in closed single-family sales and above-average increases in closed condominium sales from a year earlier. Contacts cited modest declines in mortgage rates since last fall as a likely reason for buyers' increased willingness to enter the market. Although inventory levels remained low, listings increased by modest to significant margins around the First District in recent months, lending increased optimism for sales moving forward. Still, contacts emphasized that the number of units for sale stayed far short of what they considered a balanced market, and that a dearth of inventories had contributed to faster house price growth in 2023 from 2022.

For more information about District economic conditions visit: www.bostonfed.org/regional-economy.

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.