The economy is cooling must faster than most recognize. The Fed’s Beige Book provides more evidence.
The Beige Book is a summary of current economic conditions by the 12 Federal Reserve Districts.
The report is produced ahead of FOMC meetings. The Fed’s next monetary policy meeting is on September 18.
Overall Activity
- Economic activity grew slightly in three Districts, while the number of Districts that reported flat or declining activity rose from five in the prior period to nine in the current period.
- Employment levels were steady overall, though there were isolated reports that firms filled only necessary positions, reduced hours and shifts, or lowered overall employment levels through attrition. Still, reports of layoffs remained rare.
- On balance, wage growth was modest, while increases in nonlabor input costs and selling prices ranged from slight to moderate.
- Consumer spending ticked down in most Districts, having generally held steady during the prior reporting period.
Labor Markets
- Employment levels were generally flat to up slightly in recent weeks. Five Districts saw slight or modest increases in overall headcounts
- A few districts reported that firms reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition—though accounts of layoffs remained rare.
- Employers were more selective with their hires and less likely to expand their workforces, citing concerns about demand and an uncertain economic outlook.
- Candidates faced increasing difficulties and longer times to secure a job.
- As competition for workers has eased and staff turnover has fallen, firms felt less pressure to increase wages and salaries. On balance, wages rose at a modest pace, in line with the slowing trend described in recent reports.
- Skilled tradespeople and other workers with specialized skills remained in short supply and continued to see stronger wage increases, as did those in unions
By District
- Increased Modestly: Boston and Dallas
- Increased Slightly: Chicago
- Flat, Unchanged, Stable: New York, Kansas City, San Francisco, St. Louis
- Decline Slightly: Philadelphia, Atlanta, Minneapolis, Cleveland, Richmond
Last Month
On July 17, I noted 5 out of 12 Fed Districts Show Flat or Declining Economic Growth
This looks very recessionary because it is very recessionary. I think within 2-3 months a majority will be in decline.
Last month only Cleveland and Minneapolis showed any decline. Today, five of 12 districts do.
Nearing the Point Where Unemployment Is Greater Than Job Openings
Yesterday, I noted Nearing the Point Where Unemployment Is Greater Than Job Openings
The labor market softens again. Job openings drop and quits are below the pre-Covid level.
The Fed does not meet in October so there will not be a Beige Book report next month.
I am confident, unfortunately, that the majority of districts will be in contraction by then. Recession may be obvious.
Recession Discussion
August 2: The McKelvey (Sahm) Unemployment Rate Recession Rule Just Triggered
August 9: Recession Debate: Citing the Sahm Rule, WSJ’s Greg Ip Says No Recession
August 20: Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
Please pay particular attention to the August 20 post. The addition of a second indicator creates a signal with no false negatives or false positives since 1953!
100 percent of the time since then, the economy has been in recession with the current conditions.
I will provide an update on Friday.