The Fed’s Beige Book

The Federal Reserve wields a fair amount of power in the U.S., with reverberations that can affect the broader global economy. The Fed’s job is to monitor and adapt monetary policy to support favorable economic conditions, and it pays particular attention to the effects of inflation and employment levels.

To support this effort, the Fed relies heavily on an economic report it publishes eight times a year, known as the Beige Book. The book is comprised of reports from each of the 12 Federal Reserve banks across the U.S. Those district agencies compile anecdotal information regarding current economic conditions in their respective areas, including reports from bank and branch directors, interviews with key business contacts, economists, and market experts as well as other sources. The Beige Book recaps the information from each district bank and provides an overall summary for the nation.¹

While we may have favorite news sources for financial and economic information, many of those outlets use the Beige Book as a source. If you ever want to learn more about a specific topic mentioned, the public can access the Beige Book reports online at the Federal Reserve website. Click here to access the Beige Book national summary and regional reports for September 2021.² Also, feel free to contact us to discuss any economic factors that you believe may affect your insurance product portfolio. We are here to help.

Remember that while the Fed compiles, studies, and analyzes loads of economic data, the Beige Book is a bit different because it represents opinions from business leaders, regional economists and industry experts, which may in fact differ from district to district. In addition to examining local information, the Fed is able to assess when patterns emerge among districts that are likely to affect the country as a whole. For example, in late spring and early summer 2021, the U.S. economy appeared to be substantially strengthening, largely due to millions of Americans getting the COVID vaccine. Optimism was high, and labor shortages presented an opportunity for the capitalist principles of supply and demand to raise wages among employers.³

However, this latest release of the Beige Book shows that the resurgence of the virus, thanks to the rapid spread of the delta variant, has created yet another drag on economic growth.⁴

The agency’s Federal Open Market Committee (FOMC) is tasked with acting when necessary, so now the committee must consider when to shift to a post-pandemic monetary policy. This would entail reducing its $120 billion in monthly bond purchases. Although jobs are plentiful, the labor shortage is characterized by a phenomenon the Fed terms “ghosting coasting,” when an employee takes a job for a few days and then quits with no notice because he can easily get a job elsewhere. This is especially common in the restaurant and hospitality industries, in which some hotels have had to reduce the capacity for lack of housekeeping staff.⁵

Furthermore, inventory shortages and shipping delays have increased pressure on consumer prices for all kinds of items, from the beer industry to luxury apparel. If supply chain issues do not improve, it won’t be long before inflationary prices — which are pandemic-driven rather than economically driven — may cause the FOMC to act.⁶

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¹ Federal Reserve. Sept. 8, 2021. “Summary of Commentary on Current Economic Conditions by Federal Reserve District.” https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm. Accessed Oct. 5, 2021.

² Federal Reserve. Sept. 8, 2021. “Beige Book – September 8, 2021.” https://www.federalreserve.gov/monetarypolicy/beigebook202109.htm. Accessed Oct. 5, 2021.

³ Clark Merrefield. The Journalist Resource. Sept. 14, 2021. “Story ideas from the Federal Reserve’s Beige Book: Sept. 2021.” https://journalistsresource.org/economics/beige-book-story-ideas-september-2021/. Accessed Oct. 5, 2021.

⁴ Jeff Cox. CNBC. Sept. 8, 2021. “Businesses are feeling stronger inflation and paying higher wages, Fed’s ‘Beige Book’ says.” https://www.cnbc.com/2021/09/08/businesses-are-feeling-stronger-inflation-and-paying-higher-wages-feds-beige-book-says.html. Accessed Oct. 5, 2021.

⁵ Howard Schneider and Ann Saphir. Reuters. Sept. 8, 2021. “U.S. economy “downshifted slightly” in August -Fed’s Beige Book.” https://www.reuters.com/world/us/us-economy-downshifted-slightly-august-feds-beige-book-2021-09-08/. Accessed Oct. 5, 2021.

⁶ Ibid.