The Economy: 10 Key Points from the Fed’s Beige Book

By at 6 June, 2019, 12:22 pm

by Raymond J. Keating-

Data and news continue to serve up a conflicting look at the U.S. economy. Measures swing between points indicating solid, middling and weakening growth.

The latest take via the Federal Reserve’s latest Beige Book released on June 5 seems to point to growth being middling, or in Fed-speak, “modest.”

Consider 10 key points offered on the economy based on information from contacts outside the Fed.

First, economic growth, while still classified as “modest,” was “a slight improvement over the previous period.” Any improvement, of course, is welcome. It was reported, “Almost all Districts reported some growth, and a few saw moderate gains in activity.”

Second, it is worth noting, however, that districts in the heartland showed the slowest takes on growth, with economic activity in the Chicago district increasing “slightly on balance”; in the St. Louis district “unchanged”; in Minneapolis “slightly”; and in the Kansas City district, “activity continued to expand at a slight pace.”

Third, in terms of various sectors of the economy, manufacturing was deemed to be “generally positive, but some Districts noted signs of slowing activity and a more uncertain outlook among contacts.”

Fourth, residential construction and real estate showed growth, but varying widely across districts.

Fifth, consumer spending was seen as “generally positive but tempered,” with tourism activity stronger, but vehicle sales “lower.”

Sixth, loan demand “was mixed but indicated growth.”

Seventh, agriculture “remained weak.”

Eighth, on jobs and wages, it’s worth noting the Fed’s summary:

“Employment continued to increase nationwide, with most Districts reporting modest or moderate job growth and others reporting slight growth, an assessment similar to the previous reporting period. Solid hiring demand was noted for retail, business services, technical, manufacturing, and construction jobs and by staffing agencies in general. However, stronger employment growth continued to be constrained by tight labor markets, with Districts citing shortages of both high- and low-skill workers. Competition for workers reportedly applied some wage pressures across a wide range of occupations and induced improvements in benefits to attract more workers and to improve retention of existing employees, according to several Districts. However, overall wage pressures remained relatively subdued given low unemployment rates; a majority of Districts reported modest or moderate wage growth.”

Ninth, price increases were generally categorized as “modest,” and manufacturers reported “input prices were mixed, with some Districts citing an easing in steel and other metals prices, while contacts in others noted that raw materials prices remained elevated.”

Tenth, as for the outlook for the coming months, it was classified as “solidly positive but modest, with little variation among reporting Districts.”

So, the economy keeps humming along at a decent pace, workforce shortages and retention continue to remain an issue for business (and therefore business expansion), and some industries like agriculture are experiencing a particularly rough period.  Pro-growth policies from Washington would help to boost and sustain the economy, as well as the industries that are particularly hurting, and removing uncertainties relating to tariffs and trade policy are a critical piece of that policy mix that needs to be addressed right away.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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