- Today’s Beige Book showed that economic activity contracted sharply across all regions in the United States as a result of COVID-19 and the measures to contain it.
- Significant concerns about the coronavirus outbreak were evident in the report, with the words “COVID-19” and “coronavirus” mentioned 85 times and pandemic mentioned 41 times. Retail, leisure & hospitality were hardest hit as a result of social distancing measures and mandated closures of nonessential business. However, all industries were impacted in various ways. Manufacturing activity was mostly down due to shut downs, supply-chain disruptions, infection prevention measures and production delays. All districts reported a high degree of uncertainty among businesses for the outlook in the coming months, with most expecting conditions to worsen in the months ahead.
- Demand for loans was strong. Companies were tapping credit lines for liquidity, while households rushed to refinance their mortgages and modify their loans.
- Employment declined in all Districts, mostly via temporary layoffs and furloughs. Businesses were hopeful that they will be able to re-hire workers once activity resumes. Not surprisingly wage pressures were softening, except for workers in essential sectors, who were offered “hardship” or “appreciation” pay increases.
- Inflationary pressures had also eased, as prices fell for both inputs and outputs. However, there were some significant price increases for some agricultural commodities, consumer goods and freight services due to supply chain disruptions.
Key Implications
- The latest Beige Book painted a dire picture of plunging economic activity across the U.S. as COVID-19 spread widely, and shutdowns and social distancing measures came into effect in the second half of March. Impacts have included record job losses, a high degree of economic uncertainty, and falling wages and prices.
- The labor market was hard-hit by the mandated businesses closures, with no District spared. However, as our recent report on the states along the eastern seaboard shows, northern states have seen a more pronounced negative shock to their labor markets so far. Benchmarked against the size of the labor force, the implied job losses to date are largest in Rhode Island, Pennsylvania, New Hampshire and Massachusetts.
- Given the scope of unprecedented job and revenue losses, Congress has moved quickly to provide unprecedented support packages for households and businesses (see report). However, speed is of the essence. To an extent that these funds are delivered to households and businesses in a timely way, they should go a long way in reducing the economic fallout and speeding up the healing of the economy once businesses begin to re-open.
