Fed’s Beige Book: Poor-to-Mixed Assessments on Current Economy

By at 17 April, 2024, 4:07 pm

by Raymond J. Keating –

Eight times a year, the Federal Reserve publishes its “Beige Book,” which offers information on where the economy stands based on reports from Fed district bank and branch directors, along with interviews of business contacts, economists, market observers and others.

The latest Beige Book, published on April 17, pointed to continued sluggishness in the economy, extending that take from the two previous editions published this year.

The latest report opened: “Overall economic activity expanded slightly, on balance, since late February. Ten out of twelve Districts experienced either slight or modest economic growth – up from eight in the previous report, while the other two reported no changes in activity.”

Among the key points:

● “Consumer spending barely increased overall…”

● “Manufacturing activity declined slightly, as only three Districts reported growth in that sector.”

● Also noted were “slight increases in nonfinancial services activity, on average, and bank lending was roughly flat overall.”

● Residential construction was up slightly while commercial construction was flat.

● As for the labor market, seeming contradictions persisted: “Employment rose at a slight pace overall, with nine Districts reporting very slow to modest increases, and the remaining three Districts reporting no changes in employment. Most Districts noted increases in labor supply and in the quality of job applicants… Despite the improvements in labor supply, many Districts described persistent shortages of qualified applicants for certain positions…”

● Finally, price increases were classified as “modest” overall.

It’s interesting to see reports like this, along with a wealth of other data pointing to a mixed, arguably sluggish economy, and yet, many “experts” keep talking about a strong economy. Why? It might have to do with performance versus expectations, or versus what’s going on in other nations.

However, part of this is about focusing exclusively on the unemployment rate to the exclusion of broader economic measures, such as real GDP growth. In addition, we seem to be in another era of diminished expectations on the economy, not dissimilar to what was heard in the 1970s and very early 1980s. Suddenly, and for no good reason, under-performing real GDP growth of 2 percent or 2.5 percent is now deemed strong. That’s a political decision, given that economics – specifically, economic history – makes clear that real growth has been poor over the past 16 years, with the average annual real GDP growth rate registering 3.6 percent from 1950 to 2006 versus only 1.8 percent from 2007 to 2023.

Policymaking needs to change to establish a sound foundation – including tax and regulatory relief, free trade, pro-immigration reforms, restrained growth in government, and sound money  – upon which entrepreneurship, investment and the economy can flourish.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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