Fed’s latest Beige Book report highlights a growing economic slowdown across the US. While economic activity grew slightly in three Districts, the number of Districts reporting flat or declining activity increased from five in the previous period to nine in the current period, indicating broader stagnation.
Employment levels were generally “flat to up slightly”, with five Districts noting modest increases in headcounts. However, some Districts reported that firms are reducing shifts, leaving positions unfilled, or trimming headcounts through attrition, though layoffs remain uncommon. Wage growth continues at a modest pace, consistent with the recent trend of slowing wage increases.
Overall, prices increased modestly during the reporting period, but three Districts saw only slight rises in selling prices. Nonlabor input costs were mostly described as modest to moderate and generally easing, though one District reported a slight uptick in input cost increases.
Fed’s Daly to assess upcoming data before finalizing rate cut size
In an interview with Reuters, San Francisco Fed President Mary Daly acknowledged that a rate cut is widely expected this month, but emphasized that the exact size of the cut remains uncertain.
“We don’t know yet, right?” Daly said, noting that key data such as the upcoming labor market and CPI reports will play a critical role in the decision-making process. She added, “I want more time to do all the work that’s needed to make the best decision.”
Daly also warned of the risks of over-tightening, particularly as inflation eases while the economy slows. “As inflation falls, we’ve got a real rate of interest that’s rising into a slowing economy; that’s a basic recipe for over-tightening,” she explained.
Highlighting the importance of protecting the labor market, she stressed that further slowing would be “unwelcome” and a key factor in shaping future policy decisions.