Fed Beige Book Reveals Multiple Economic Concerns: Slowing Hiring, Rising Prices, and Cautious Consumers

The latest economic situation report, the "Beige Book," released by the Federal Reserve on Wednesday, showed that due to weak sales and uncertainties related to the U.S. trade war, businesses are "reluctant to hire." However, thus far, tariffs have only "moderately or modestly" exacerbated inflation.

The Federal Reserve publishes the Beige Book eight times a year, summarizing the findings of 12 regional Federal Reserve banks on the national economic situation. This edition of the Beige Book was compiled by the Federal Reserve Bank of Philadelphia based on information collected up to August 25.

Investors widely expect the Federal Reserve to cut interest rates this month to help support the job market. Fed officials had previously expressed concerns about slowing hiring, and the findings in the latest Beige Book did little to alleviate those concerns.

The key finding of the latest Beige Book is that U.S. economic growth is below average and shows almost no signs of acceleration.

The report also indicates that although the labor market has weakened, it remains relatively stable. Businesses are focused on using artificial intelligence to replace certain positions and reducing staff by not filling vacancies after employees resign or retire.

The Beige Book reported that due to increased economic uncertainty and higher tariff rates, wage growth for many households has failed to keep pace with rising prices, leading to flat or declining consumer spending across all Federal Reserve districts.

However, Fed officials advocating for a rate cut this month, particularly Governor Waller, expect tariff-related inflation to be a one-time increase that will gradually fade next year. Waller and those supporting rate cuts believe that a deteriorating labor market is a more significant problem for the economy.