The latest Federal Reserve Beige Book report reveals signs of an economic slowdown, with growing concerns about demand and a murky economic outlook. Economic activity grew slightly in just three of the Fed’s 12 districts, while the number of districts reporting flat or declining activity jumped from five to nine since the prior report.
- Employers are becoming more cautious with hiring, being increasingly selective about new employees and less likely to expand their workforces.
- This shift is driven by concerns over demand and an uncertain economic environment, leaving job candidates facing longer search times and tougher competition for available positions.
As competition for workers eases, the report notes that staff turnover has declined, leading to reduced pressure on firms to raise wages. On balance, wage increases have slowed to a modest pace, reflecting a broader trend of wage growth deceleration observed in recent months.
Regional insights:
- In the Richmond district, economic activity “slowed mildly,” reversing the slight growth seen in the prior period. Consumer spending, particularly on retail goods, vehicles, and tourism, saw notable declines, and manufacturing activity contracted slightly. The real estate sector softened, with residential activity slowing and mortgage loan demand decreasing, though banks reported an uptick in demand for home equity lines of credit.
- The Atlanta district reported that low- to moderate-income consumers and small businesses remain financially strained. Consumer spending weakened as households became more price-sensitive, and leisure travel continued to decline. Business travel showed signs of improvement, though overall hotel spending fell. Housing demand dropped further due to ongoing affordability issues, and housing starts contracted.
The bottom line: The latest Beige Book paints a picture of an economy losing steam, as businesses pull back on hiring and wage increases moderate. Consumer spending, a key driver of the economy, is also showing signs of weakness, particularly in sectors like housing and tourism.
