By Josh Mitchell And Jeffrey Sparshott 

WASHINGTON--A tightening labor market pushed up workers' wages in pockets of the U.S. this summer, the Federal Reserve said Wednesday, but slowing growth in Asia threatened to hit American factories.

The Fed's beige book survey portrayed the U.S. economy overall as continuing to expand at a moderate or modest pace in July through mid-August. It suggested certain areas of the economy are relatively strong, including the jobs market, the housing market and construction. But it also pointed to growing obstacles, such as the strong dollar and slowing growth in China.

While the beige book offers only anecdotal accounts, it supports the notion that the economy's expansion remained on track in the third quarter after growing at a solid 3.7% annual pace in the spring. It comes before the central bank's Sept. 16-17 policy meeting, at which officials are expected to debate whether to raise short-term interest rates.

Reports from the 12 Fed districts across the U.S. "indicate economic activity continued expanding across most regions and sectors during the reporting period" that covered the start of the third quarter, the Fed said. Eleven districts reported modest or moderate growth, while Cleveland offered a less optimistic assessment.

Most notably, the Fed pointed to wage pressures in some regions that it attributed to steady hiring and falling unemployment.

Most districts reported "relatively stable wages," with "slight to modest" increases at the start of the third quarter compared with the prior six weeks. "However, several Districts reported increasing wage pressures caused by labor market tightening," it continued.

The St. Louis Fed, for example, reported that three-fifths of companies it polled had raised wages in the prior three months. The New York Fed cited "increasing wage pressure on starting salaries." Cleveland reported "intensifying wage pressure" in industries including construction, retail and transportation.

The report also pointed to strength in real estate. "Existing home sales and residential leasing widely improved, with home prices moving up in most areas," it said. Commercial real estate was also "mostly positive."

But the assessment of U.S. factories, which are battling a strong dollar, depressed oil prices and slowing growth in Asia, was mixed.

The Fed said reports on the sector were "generally positive," with 10 of 12 districts reporting stability or growth. But it added that several factors are "damping demand." Falling energy prices have curbed demand for machinery. Meanwhile, the strong dollar and slowing economic growth in Asia pushed down the price of imports such as steel, making U.S. goods less competitive.

The U.S. economy grew at a 3.7% annual rate in the second quarter. Private economists are forecasting that it will grow at a roughly 2% to 3% rate in the current quarter.

The Fed is scrutinizing reports on the economy as it debates when and how quickly to raise short-term interest rates, which have been pinned near zero since the recession. The central bank has signaled it could move as early as its Sept. 16-17 meeting, but it has said it wants assurance the economy is continuing to advance and that inflation is slowly moving toward its target of 2% yearly.

The beige book said "both input and output prices remained stable in most districts."

Write to Josh Mitchell at joshua.mitchell@wsj.com and Jeffrey Sparshott at jeffrey.sparshott@wsj.com

 

(END) Dow Jones Newswires

September 02, 2015 14:29 ET (18:29 GMT)

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