Here is the macro-level view:
Activity in the non-financial service sectors continued to strengthen in most Districts, with the notable exception of St. Louis, which reported fairly widespread declines. Service sector activity generally expanded in the Boston, New York, Philadelphia, Richmond, Minneapolis, Kansas City and Dallas Districts, though Richmond noted deceleration in the pace of growth. There were also pockets of strength in particular sectors. Information technology firms saw activity expand in the Boston, Richmond, Minneapolis, Kansas City, and San Francisco Districts. Employment agencies in the Boston and Chicago Districts indicated continued improvement in activity, while New York and Dallas reported some slowing in this industry. New York, Richmond and Minneapolis cited strengthening in business and professional services, while San Francisco indicated steady to mixed activity in this sector.
Activity in the transportation sector improved in the Cleveland, Atlanta, Kansas City and Dallas Districts. Philadelphia and Richmond noted some slowing in growth, and New York reported steady shipping activity, while San Francisco indicated a slowdown in cargo traffic at Southern California seaports. Dallas also reported weakening in container trade volumes but noted increases in cargo volume, railroad shipments and small parcel shipments.
Overall, the macro-level information is solid, and indicates the overall environment continues to improve. Seven districts reported an increase, while an eighth (Richmond) is still increasing but at a slower rate. Also note the the breadth of industries showing an increase -- technology, employment and transportation were all cited.
Let's look at the district level information. Remember that not all districts report on this activity.
Boston: New England software and information technology firms report modest increases in activity through May. Year-over-year revenue increases, ranging from 4 percent to 20 percent, were generally driven by increases in software license revenues, while maintenance contracts grew at a slower rate. Contacts report pick-ups in demand across sectors, including manufacturing, financial, and medical. Increased activity has led to increasing headcounts, many by more than 5 percent from a year ago. Contacts generally cite a tightening labor market, especially for specialized technical positions, but note that it has not resulted in upward pressure on wages. Selling prices are holding steady, although half of responding firms observe less discounting pressure currently than in Q4 2010; in fact, two contacts plan to raise prices modestly later this year. Capital and technology spending is mostly steady, with only two contacts reporting an increase in outlays. The outlook among software and IT services firms remains positive, with most expecting their current rate of growth to continue through the end of 2011.
The majority of New England staffing contacts report that business conditions continue to improve, although a few have experienced stagnant or volatile activity over the past three months. Revenues are flat to increasing year-over-year, with increases from 3 percent to 35 percent. Labor demand continues to strengthen, with notable improvements in the information technology, medical, manufacturing, and legal sectors. However, a few contacts lament an elongated hiring cycle, with employers "still waiting for the perfect candidate." Demand for permanent and temporary-to-permanent hiring continues to trend upwards-a sign that "things are heading in the right direction." Labor supply, at least at the high end, continues to be tight in the region. Bill rates and pay rates are steady, with most contacts reporting only modest changes. Looking forward, most New England staffing contacts are more positive than they were three and six months ago, predicting strong growth in the rest of 2011.
NY: Reports from business contacts give a mixed picture of the labor market. A major New York City employment agency reports that, after a robust March, hiring activity weakened noticeably in April and early May, though it picked up again in the third week of May. Still, the supply of available workers has dwindled further, and more workers are testing the water and leaving current jobs for new ones. Starting salaries have remained steady and below pre-recession levels. Law firms, in particular, have started hiring more, while financial sector hiring has been stable. A contact in the securities industry reports that the jobs being added there tend to be mostly in support areas, such as legal and compliance, as opposed to revenue-generating areas.
Non-manufacturing firms broadly indicate that both business and hiring activity have been steady to modestly higher since the last report. Contacts have become slightly less optimistic about the near term outlook and have scaled back hiring plans somewhat. Non-manufacturing firms report that cost pressures remain widespread but have not broadened since the last report... A trucking-industry contact reports that shipping activity has shown no sign of slipping, despite the recent surge in diesel prices.
Philly: Third District service-sector firms contacted for this report generally described demand for their services as growing modestly. Business-service firms noted some increased activity as a result of both greater usage by current clients and demand from new client companies. An executive at a business-service firm said, "Our activity in cyclical sectors is starting to improve." Contacts in the transportation sector reported some recent easing in the slow, steady growth rate that held for the first four months of the year. Contacts in engineering and architectural services reported slight gains in current activity and a somewhat stronger upturn in inquiries. Most of the service-sector firms polled in May expect growth to continue at around its recent pace.
Cleveland: Freight transport executives reported that shipping volume expanded for a broad range of manufactured goods, and they expect markets will continue to grow in the upcoming months. Several contacts told us that they are attempting to raise their shipping prices as customer contracts come up for renewal, and they are seeing a slight bottom-line improvement. The price for diesel fuel remains elevated, with most of the increase being passed through to customers via surcharges. We also heard several reports about rising costs associated with recent changes in environmental and federal safety regulations. Capital outlays are expected to accelerate during 2011, if financing can be obtained.
Richmond: Contacts at non-retail services firms reported somewhat slower revenue growth in recent weeks. Executives at several healthcare facilities noted flat demand for services over the last month. One hospital administrator also expressed uncertainty about the financial effect on his hospital of the increase in "newly insured" populations under healthcare reform. He noted significant challenges for smaller, rural hospitals with respect to information technology investments needed to secure federal matching opportunities. In contrast, professional, scientific, and technical firms that we survey reported slightly quicker revenue growth. Price growth at services firms was mild, while wage increases were widespread. A healthcare system executive in central Virginia reported that salary pressures were being driven by shortages in some specialties.
St Louis: Activity in the District's services sector has declined since our previous report. Numerous casinos in the District have been forced to temporarily close because of flooding on the Mississippi River. Additionally, contacts in the telephone call center, health care, business support, and support activities for transportation industries reported plans to decrease operations in the District and lay off employees. In contrast, a contact in the nursing care industry announced plans to expand operations and hire new workers.
Minneapolis: Professional business services firms reported increased activity since the last report. Preliminary results of a mid-year business outlook poll by the Minneapolis Fed found that professional services respondents expect to increase sales and profits over the next year after gains during the past 12 months. The survey also revealed that access to bank credit over the past three months has improved, leading businesses to plan expansions and increase capital expenditures. An environmental consulting firm noted a strong increase in orders from the public sector and slight increases from the private sector. Information technology contacts noted an increase in activity over the past two months.
KC: Growth in transportation activity accelerated from the previous survey, and most firms reported optimism about future sales. The majority of high-tech services firms reported strong growth in sales, though the pace slowed a bit from the previous month. Capital spending plans improved for transportation companies, and high-tech and manufacturing firms also reported fairly solid plans for future expenditures.
Dallas: Staffing firms reported growth in orders has leveled off or slowed slightly since the last report, although demand remains strong, particularly from the energy, healthcare, insurance and banking sectors. Outlooks are positive, and contacts expect demand to remain stable through year-end. Demand for accounting services increased since the last report, as is typical for this time of year. Improved demand has helped firms raise fees for advisory services. Legal firms noted mostly steady demand, with some strength in corporate, intellectual property litigation, and real estate services.
Reports from transportation services contacts were mostly positive. Intermodal transportation firms noted an increase in cargo volumes during the reporting period. Railroad shipments rose moderately, with particularly strong volume growth in grains, metals, petroleum and chemical products. Container trade volumes declined but were up from year-ago levels. Growth in small parcel shipments accelerated during the reporting period buoyed by demand from the wholesale trade and retail sectors. Airline traffic held steady over the past six weeks. Demand for travel within the US and to Latin America was solid, but load factors for international flights to and from the Pacific region remained weak. Contacts expect modest improvement in airline demand and revenue this year.
Observations, in no order of importance
-- The overall read of this report is very solid. Although several districts reported declines in overall activity (NY, Richmond, Dallas) the overall numbers were still positive.
-- Two districts that report on transportation (Cleveland and Dallas) reported increases and a solid overall report.
-- Expectations were also solid, showing hope for the future.