The Federal Reserve's “Beige Book,” released every six weeks, features executive anecdotes on the state of the economy from a regional perspective, and the latest report, released earlier this week, confirmed the economy is slowing and may be sliding into recession.
From the Boston area: “Retailers aimed to gradually lower average prices to consumers by shifting their product mix toward lower-priced items.”
From the New York area: “Hiring…is shifting toward replacement rather than growth…many companies are putting hiring plans on hold.”
From the St. Louis area: “Production costs have risen and are expected to continue to rise, reducing profit margins.”
From Atlanta: “Further weakening (of the economy) could lead to future layoffs.”
From Kansas City: “The biggest obstacle to increased lending has been (high) interest rates.”
Overall, the Beige Book authors lament, “Consumer spending declined slightly in most districts, manufacturing activity declined in most districts, reports from most districts indicated soft home sales, and employers became more cautious about hiring and less likely to add to their workforces due to concerns about demand and the uncertain economic outlook.”
Job seekers are “finding it increasingly difficult and time consuming to find work” and “many districts have observed continued increases in both transportation and insurance costs.”
Just six weeks ago, the Fed's economic report showed the economy slowing in five of 12 districts. This week's report showed the economy weakening in nine districts.
ADP Verification
A report released Wednesday by ADP, the largest payroll service provider in the U.S., confirmed the conclusions of the Fed's Beige Book. Wall Street had expected payrolls to increase by 140,000 new jobs in July. But ADP reported that private sector payrolls increased by just 99,000, the smallest increase since 2021. The great thing about ADP's report is that it's “real-time,” based on earnings for the roughly 10 million employees ADP serves and monitors every day.
Other reports released this week showed that job openings across the economy fell to their lowest level in three and a half years while layoffs rose, a sign the economy is sliding into recession.
A “bar of indicators” feature in Tuesday's New American sums up the current state of the U.S. economy. Two years ago, only two of 20 economic indicators were in negative territory. Last year, five showed negative signs for the economy. This week, the number predicting a recession jumped to nine. Add to this the Institute for Supply Management's (ISM) manufacturing index, which has been negative for five consecutive months, and a purchasing managers' report showing new orders at a two-year low, and you can come to the conclusion that the U.S. economy is on its way to, if not already in, a recession.
As retailers close stores and major banks close branches, the consumer “optimism index” compiled and published by Investor's Business Daily has remained in negative territory for more than three years.
Citizens vote with their wallets
All of this is becoming more and more important as we approach the presidential election. For example, the top issues for Latino voters are 1) inflation and 2) jobs and the economy. Two in three of them say they will definitely vote in the next election, so these “purse issues” will be top of mind in November. This is likely true for other voters as well.
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'Indicators of indicators' predicts recession
