An Unflattering Picture Depicted by the Latest Federal Reserve Beige Book of Regional Economic Trends – Currency Thoughts
An Unflattering Picture Depicted by the Latest Federal Reserve Beige Book of Regional Economic Trends
June 4, 2025
Before each of the scheduled FOMC meetings, each of the twelve districts survey contacts in their districts for impressions regarding economic activity, labor market conditions and price trends. Responses are summarized in the Beige Book, published today and covering the period from the prior meeting up to May 23rd. In the Boston, New York, Philadelphia, Kansas City, Minneapolis and San Francisco Fed districts, respondents reported slight to moderately declining activity. The districts of Cleveland, Dallas and St. Louis reported activity to have neither risen nor fallen, and only three of the twelve districts (Chicago, Atlanta, and Richmond) learned that activity had grown, albeit at a only a slight pace. Although actual inflation had stayed moderate, additional feedback on prices skewed toward a rise in expected inflation. Employee hiring had become stingier.
This disappointing snapshot of economic perceptions in the nation comes on the heels of a 0.2% decline of GDP during the first quarter of 2025. That slight contraction nonetheless represents an abrupt loss of growth momentum compared to the last three quarters of 2024 when U.S. inflation-adjusted GDP expanded at annualized rates of 3.0%, 3.1% and 2.4% respectively. Adding to the concern of investors, the Trump Administration has taken to heart the old Facebook motto to move fast and break things. The essence of growth can be boiled down to more hours worked and greater productivity (output per hour worked). The impact on the labor force of deportation, lessening immigration and massive cuts in federal workers will not be offset by a faster birth rate for a generation or more. Going to war against America’s prestigious universities is a brilliantly conceived plan to slam U.S. labor productivity in a variety of key 21st century fields. Meanwhile, it has been estimated by a variety of private and official sources that the proposed budget working its way through Congress will add trillions of dollars to the national debt even as radical changes in foreign policy and the nation’s anchor — rule of law, not by people — cast doubt on U.S. attractions that investors have long taken for granted.
It will take many quarters, if not years, to know if all the changes being made actually make the U.S. economy greater in the long run than it has been of late. The earliest estimate of real GDP in the second quarter will not be reported until the end of July, by which time the budget bill might be passed and the Rubicon crossed.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: latest Beige Book
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