Fed Beige Book: US Economy Shows Slowdown, But Hope Remains

The Federal Reserve’s latest Beige Book paints a picture of a sluggish US economy. Released on Wednesday, the report found that economic activity stagnated or even declined in most regions. While job losses were uncommon, businesses are being cautious. Hiring slowed, with some companies opting for shorter shifts, leaving positions vacant, or relying on attrition to reduce headcount. Employers are citing concerns about consumer demand and a cloudy economic future as reasons for their cautious approach.

Despite the slowdown, there are some glimmers of hope. Prices and wages continued to rise modestly, according to the Fed. Contacts in several districts expressed a belief that economic activity may stabilize or even improve in the coming months.

The Beige Book, compiled by the Cleveland Fed, gathers information from businesses and other sources across the country’s 12 Federal Reserve districts. This latest report, based on data collected up to August 26th, reflects a shift from the previous period when only five districts reported flat or declining activity.

Job seekers themselves are feeling the pinch of the slowdown, reporting increased difficulty and longer times finding employment. This trend aligns with other recent data, including a separate report released on Wednesday showing US job openings at their lowest level since early 2021. A weakening job market, coupled with declining inflation, led Federal Reserve Chair Jerome Powell to announce last month that the central bank would be lowering interest rates. The first rate cut is expected during the policymakers’ meeting on September 17th-18th.

The rising unemployment rate and employers’ reluctance to hire further highlight the current economic slowdown. However, the Beige Book also offers a glimmer of optimism, suggesting that the slowdown may be temporary. Federal Reserve Chair Powell himself has praised the Beige Book, emphasizing the importance of anecdotal data in understanding the economic landscape.