Fed Beige Book: Economic Activity Mostly Flat, Reports of Corporate Layoffs Increase

On Wednesday local time, the Federal Reserve released the Beige Book on economic conditions. Since September, U.S. economic activity has been largely flat, with overall employment remaining stable. However, the number of companies reporting layoffs has recently increased, heightening market concerns about a softening labor market.

This edition of the Beige Book summarizes information collected by the Fed's 12 regional reserve banks from business and community contacts up to October 6. The report was released on the day the U.S. Bureau of Labor Statistics was originally scheduled to publish the key CPI inflation report, but the release has been postponed to October 24 due to the government shutdown.

The Beige Book indicated that in most districts, the number of employers reducing their workforce through layoffs has increased. Respondents cited reasons including weak demand, increased economic uncertainty, and in some cases, increased investment in artificial intelligence technology.

It is worth noting that the term "tariff" appeared 64 times. "Several districts reported that tariffs were leading to increased input costs, though the extent to which these new costs were being passed through to final prices varied." In contrast, the term "tariff" appeared 100 times in the Beige Book released by the Fed in August.

The Beige Book is typically released two weeks before each of the Fed's interest rate decision meetings, aiming to provide more timely reference information for central bank officials to assess the U.S. economic situation. Compared to official statistics, this information can more directly reflect economic dynamics. Due to the interruption in the release of official economic data caused by the U.S. government shutdown, the importance of this Beige Book in Fed policymakers' discussions might be higher than usual.

St. Louis Fed President Alberto Musalem said last week: "Anecdotes are data too. Sometimes, for the past six or seven months or twelve months, you hear the same kind of things, but then suddenly a new trend can emerge, an inflection point, and those changes often show up in conversations before they show up in the official data."

Regarding the economic outlook, the Beige Book shows that high uncertainty will continue to restrain economic activity. One district's report specifically noted that a prolonged government shutdown could pose a downside risk to economic growth.