STRICTLY BUSINESS: LABOR STILL A HIGHLY DEMANDED COMMODITY

New claims for unemployment benefits were up last week, but were still in a range economists said indicated employers are having trouble finding qualified workers.

Labor is a highly demanded commodity these days, said Labor Department spokesman.

While the tight labor market can be good for workers, it is worrisome to some economists. They are concerned that employers will recruit workers with big increases in wages and benefits, increased costs that companies could pass along to consumers in the form of sharply higher prices.

Some companies are becoming more creative in their labor recruitment and hiring, economists said. Some employers are offering flexible hours, day care, education and training as inducements. Others are casting their recruitment nets wider, turning to the disabled and others who traditionally have had a difficult time finding a job, economists said.

The speeding economy has pushed the nation's unemployment rate near a 30-year low of 4.1 percent.

To slow the economy and keep inflation from escalating, the Federal Reserve on Tuesday boosted interest rates by a quarter-point, the fifth increase since June.

Given the outlook for continuing strong growth, many economists believe the Fed will raise rates again, probably by another quarter-point, on May 16.

Meanwhile, the district economy continues to operate at a high level, according to the latest St. Louis edition of the Federal Reserve's "Beige Book," which includes the summary of economic conditions for the Fed's Eighth District.

The report highlights economic developments in eastern Missouri, all of Arkansas, western Kentucky, Western Tennessee, Southern Illinois, Southern Indiana and Northern Mississippi.

The Fed's Eighth District is headquartered in St. Louis and has branches in Little Rock, Ark., Louisville, Ky., and Memphis, Tenn.

Named for the color of the cover and issued eight times a year, the Beige Book is best described as a collection of anecdotal information, compiled primarily from various business and community leaders.

These contacts provide information confidentially, knowing that the Fed uses the information to put together a short-term snapshot of how the economy is doing.

Although the Beige Book is not an in-depth report, the Federal Reserve uses it as one of many tools to determine the direction of monetary policy.

Reports of worker shortages at a variety of companies are still the norm, and companies continue to respond to the shortages in the Eighth District with innovative training/bonus programs.

Residential real estate markets remain robust overall, despite some slowdown in the growth rates of sales and construction near the end of last year.

Banks continue to search for additional sources of funds as loan demand remains strong, while deposit growth is flat.

Drier-than-normal weather has resulted in some low river areas. Barge traffic on the upper Mississippi River has been slowed, but still moving.

Contacts continue to report healthy economic conditions overall in the district, with several expansions leading to job growth. Wal-Mart, for example, will not only open its largest supercenter in Arkansas this fall, but will also add 250 employees at a western Kentucky store. Two new e-commerce companies in St. Louis and Memphis are creating a total of 850 jobs, and a Memphis paper products firm is adding 625 jobs. Expansions at the BioKyowa and Procter & Gamble facilities at Cape Girardeau will be resulting a few hundred jobs.

But a scattering of downswings, most notably the layoff, in response to falling prices, of 425 workers in western Kentucky at one of the nation's two uranium plants. Makers of commercial kitchen equipment expect a moderate slowdown this year due to higher interest rates. And a dip in the demand for athletic gear has led to the downsizing of an athletic store chain, eliminating 450 jobs.

The sharp rise in oil prices over the past few weeks has been affecting not only customers, but also the district's trucking and transportation industry profit margin. On the other hand, higher oil prices have spurred a moderate resurgence of drilling and exploration activity at some firms in the district.

The difficulty of finding workers has hindered some plans for expansion. Labor shortages are affecting both skilled and unskilled labor at a number of firms, including manufacturers, banks, hotels and retailers. In addition, the health care industry is experiencing a severe shortage of nurses. Some communities, however, are using job-training programs and expanded vocational training programs in high schools to attract new workers, such as teenagers and older and disabled people, into the labor force to help alleviate the problem.

Despite a slowdown in home sales at the end of 1999, sales remained at high levels, making 1999 one of the best years on record, according to most real estate agents. Some regions, such as parts of northern Mississippi, experienced record figures for residential sales in both December and January.

Construction has mirrored sales. Monthly residential building permits in almost all district metropolitan areas were down in December, although year-to-date they were above their year-earlier levels.

Although the demand for loans at many district banks remains relatively strong, deposit growth continues to be flat, forcing banks to seek new sources of funds. Commercial and industrial (CI) loans and commercial real estate loans have been the growth categories, while residential real estate and consumer loans have shown some weakness. Delinquency rates of some CI loans have recently increased moderately; however, contacts believe that this is simply a return to trend. Some bankers report that tighter interest-rate spreads have led to some higher fees.

The drier-than-normal weather that has persisted throughout the district since last fall has caused the Upper Mississippi River to drop to its lowest level since 1991. These low levels have caused some barges to run aground, which in turn has led to increased dredging activity and size restrictions on barge tows headed downstream.

Last month, the USDA announced that this year's tobacco quota will be 45 percent lower than last year's. Because this is the third consecutive year of quota cuts and because burley tobacco is Kentucky's largest cash crop, contacts are concerned that many farmers may be pushed deeper into financial trouble. In fact, agricultural lenders in general remain concerned about agricultural loans, as crop prices are expected to remain low in the foreseeable future.