Hashing Through the Next to Useless Fed's July Beige Book Report

The Beige Book is a compilation of anecdotes and useless trivia most of which seldom matches reality. Let's take a peek.

Each of the Fed's 12 regions summarize activity monthly that is little more than the the various regional reports that come out every month (e.g. Empire State Report, Philly Fed Report, etc.)

Periodically the Fed combines all the regional reports into a single "Beige Book". I stopped reporting on the regional reports longs ago as the anecdotes seldom match actual Industrial Production numbers.

Those who wish to plow through 32 pages of mostly useless anecdotes can do so by downloading the July 2018 Beige Book Report.

Overall Economic Activity

Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight. Manufacturers in all Districts expressed concern about tariffs and in many Districts reported higher prices and supply disruptions that they attributed to the new trade policies. All Districts reported that labor markets were tight and many said that the inability to find workers constrained growth. Consumer spending was up in all Districts with particular strength in Dallas and Richmond. Contacts reported higher input prices and shrinking margins. Six Districts specifically mentioned trucking capacity as an issue and attributed it to a shortage of commercial drivers. Contacts in several Districts reported slow growth in existing home sales but were not overly concerned about rising interest rates. Commercial real estate was largely unchanged.

Employment and Wages

Employment continued to rise at a modest to moderate pace in most Districts. Labor markets were described as tight, with most Districts reporting firms had difficulty finding qualified labor. Shortages were cited across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, IT professionals, and truck drivers; some Districts indicated labor shortages were constraining growth. Districts noted firms were adding work hours, strengthening retention efforts, partnering with local schools, and converting temporary workers to permanent, as well as raising compensation to attract and retain employees. On balance, wage increases were modest to moderate, with some differences across sectors; a couple of Districts cited a pickup in the pace of wage growth.

Prices

Prices increased in all Districts at a pace that was modest to moderate on average; reports showed upticks in inflation in several Districts. The prices of key inputs rose further, including fuel, construction materials, freight, and metals; a few Districts described these input price pressures as elevated or strong. Tariffs contributed to the increases for metals and lumber. However, the extent of pass-through from input to consumer prices remained slight to moderate. Movements in agricultural commodities prices were mixed across products and Districts. Pricing pressures are expected to intensify further moving forward in some Districts, while in others the outlook is for stable price increases at a modest to moderate pace.

That was a synopsis. Each of the 12 regions expound on those items in detail, mostly all saying the same things, but filling up 32 pages doing so.

Tariffs

Zerohedge sorted through the garbage and discovered this perspective on tariffs.

Wall Street Journal

Bloomberg

"Just In"? Really?

Is everyone now just learning that businesses are concerned over tariffs?

That Bloomberg and the Wall Street Journal could find little else to say shows the complete silliness of the book.

Drones

ZH noted this bit about drones.

Cost of Labor

Let's be serious about what is really happening.

Drones are going to replace people whenever and wherever they can. This has nothing to do with labor shortages. Rather it pertains to the cost of labor.

And despite all of these alleged wage pressures and labor shortages (each of the 12 regions made similar claims), here is a simple fact to ponder. Real wages are down to flat for twelve months.

For details please see Real Hourly Earnings Decline YoY for Production Workers, Flat for All Employees.

Mike "Mish" Shedlock

Comments (3)
No. 1-3
Tengen
Tengen

The Beige Book doesn't quite come out every month, it's more like 2 for every 3 months. Who knows why this is, but the Fed loves being cryptic.

This report seems to be saying that all chainsaws are still in the air, and although the juggler shows mild signs of fatigue, our confidence in him remains high. The bellyaching over labor shortages refers specifically to high skill jobs and nothing else. When the BLS declares that the majority of the country is outside the labor force to keep unemployment numbers low, there is certainly no shortage of unskilled labor.

At least the Fed was momentarily honest about wage growth, calling it "modest" and admitted that firms are "adding hours". Yeah, people work a lot of hours nowadays if nobody noticed.

Ordell Robbie
Ordell Robbie

You want to see useless? Just look at that old face in the mirror, Mish! More irrelevant everyday, except, of course, to your old butt buddies from the deep south!