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Comment: Fed’s Beige Book ekes out improvements, all Districts report at least some growth

The Fed’s Beige Book reported growth across the 12 District Banks as slight-to-moderate during the period between the end of the last survey period on February 25 and closing the current one on April 8. While this is somewhat more downbeat that the modest-to-moderate that has characterized the last few years, it reflects better conditions that were present in the prior two reports. This time around 100% of the Districts overall said there was at least some growth in the regional economy as opposed to 83% in the January and March editions. The report was prepared by the St. Louis Fed.


The abrupt slowing for manufacturing and to a lesser extent for services at the end of 2018, and then the 35-day partial federal government shutdown that encompassed most of January 2019 contributed to a wobble in growth. However, it appears that activity is firming somewhat in the spring months and has a little upward momentum.  The anecdotal evidence in the Beige Book is generally a solid indicator of turns in the economy. While fears of a recession are more elevated at the moment, the Beige Book would indicate that expansion is far from absent and is improving, and might do more if the labor market resources were less strained.

Even with a lower pace of growth, the labor market has barely felt the difference. The Beige Book said, “[L]abor markets remain tight, restraining the rate of growth.” Overall employment was characterized as growing, and “most highly concentrated in high-skilled jobs.” Shortages were noted for skilled laborers in manufacturing and construction. White collar industries are facing “some difficulties finding qualified workers for technical and professional positions.” Wage growth was generally deemed “moderate” for both skilled and unskilled workers, and “Many Districts reported that firms have offered perks such as bonuses and expanded benefits packages in order to attract and retain employees.”

Price increases “have risen modestly” over the survey period. Businesses reported “Input costs increased in the modest-to-moderate range. Tariffs, freight costs, and rising wages were often cited as key factors in this trend.” However, the ability to pass-through higher costs was “mixed.”

When the FOMC next meets on April 30-May 1, the information in the Beige Book will counsel a continued wait-and-see approach to interest rate policy. The improvement in the tone of the report does not change the fact that growth has slowed and probably will not resume the same pace as in 2018. With the labor market continuing “tight” and overall inflation tame, there will be no urgency in making any alterations in policy.


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