Highlights from the Federal Reserve 'Beige Book' report on economic conditions in May for the 12 Fed districts, out Wednesday afternoon, follow:

Residential real estate activity increased moderately across most Districts. Home sales were strong in Boston, Cleveland, Kansas City, and San Francisco. Residential sales were positive but somewhat lower in other Districts. Sales for entry-level and other lower-priced homes were particularly strong, according to Chicago and Dallas contacts. Lower inventories of homes were reported by contacts in New York, Cleveland, Atlanta, St. Louis, and Minneapolis and have led to bidding wars in the Richmond District and constrained home sales in Philadelphia. Home prices were reported higher overall; Cleveland contacts said that home prices rose 3% year over year. In Philadelphia, home prices were mixed across markets and price categories.

Employment grew modestly since the last report, but tight labor markets were widely noted in most Districts. Demand for labor rose moderately in Richmond, and contacts noted continued difficulty finding workers in numerous occupations. In Boston, staffing industry contacts observed robust labor demand, particularly for specialized workers in high-skill fields. Contacts in Atlanta and Richmond said high-skill workers in high-demand fields continued to be hard to find, and low-skill jobs were also becoming harder to fill. In St. Louis, contacts that reported having trouble filling job vacancies primarily cited few applicants or candidates lacking the necessary skills. In New York, employment grew modestly, and manufacturing and services firms planned to add jobs in the months ahead. Soft labor markets were reported in energy sectors in Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas.

Wages grew modestly since the last report, with increases concentrated in areas of labor tightness. Higher wages were reported for entry-level and lower-skill positions in Richmond and Atlanta. In San Francisco, minimum wage increases pushed up wages for low-skilled workers, with diminishing effects up the pay scale. Atlanta, St. Louis, and San Francisco reported wage pressure for certain high-skilled employees. In New York, a sizable share of service-sector contacts reported higher wages. In St. Louis, more than two-thirds of hiring managers reported increasing wages and salaries by more than they had in the past few years to retain employees and attract new ones. However, in Kansas City, contacts in several industries reported only slight increases in wages and expected similar increases going forward. Wage pressure was minimal in the Dallas District, due in part to compensation at energy services firms that was steady to lower for staff that have been retained.

On balance, financial conditions improved marginally over the reporting period. Financial markets participants noted that market volatility decreased, high yield debt issuance rebounded, and upgrades outpaced downgrades for credit ratings of U.S. public financial firms. Business loan demand was little changed on balance. Contacts continued to highlight strength in commercial real estate lending, particularly in the office and healthcare segments. In addition, one contact reported a slight increase in utilization of working capital lines of credit. Loan pricing remains competitive. Contacts reported that deposit growth is outpacing loan demand growth, putting pressure on margins. Consumer loan demand was also little changed across all types of loans, with one contact characterizing conditions as “very calm.” Contacts again reported an increase in the length of auto loans. Consumer credit quality was steady.