Fed’s Beige Book Report Finds A Stalled Job Market

The U.S. economy is still stuck in its low hiring, low firing rut, according to the Federal Reserve’s anecdotal Beige Book report.

While there was no hard data attached to Wednesday’s report, which covered September and early October, the Beige Book painted a picture of employers across the country avoiding mass layoffs and also steering clear of hiring many new workers. The report is always based on anecdotes from business and community leaders.

A Hiring Chill

A restaurateur in the Cleveland Fed’s district summed up the report’s sentiment, saying their business had “no growth, so no new positions will be added.”

Another businessperson in the Atlanta Fed’s district said there was a “hiring chill,” with companies avoiding layoffs but welcoming attrition.

“Employment levels were largely stable in recent weeks, and demand for labor was generally muted across Districts and sectors,” the report said.

When it comes to assessing the labor market, the Beige Book normally takes a back seat to the Bureau of Labor Statistics’ monthly report on job creation, which is based on massive surveys of businesses and households.

But with the government and the BLS mostly shut down since Oct. 1, the Beige Book is one of the Fed’s few reliable sources of information about how the economy is doing. The report told much the same story as the most recent official data for the month of August, which showed the summer had the slowest payroll growth in years.

The Fed’s policy committee meets Oct. 29 and 30 to set the central bank’s key fed funds rate, which dictates borrowing costs for all kinds of short term loans. Fed officials are widely expected to cut interest rates by a quarter of a percentage point, the second cut in as many meetings, to boost the job market.

Tariff Trouble

The slow job market was at least partly due to President Donald Trump’s tariffs, according to businesspeople quoted in the Beige Book. Trump’s import taxes have stoked uncertainty and slowed down business in many parts of the country, the report said.

Some businesses also reported passing the costs of the import taxes on to consumers, while others said they were paying the tariffs themselves and haven’t raised prices yet.

“Tariff-induced input cost increases were reported across many Districts, but the extent of those higher costs passing through to final prices varied,” the report said.

What This Means For The Fed

The report may be important for the Federal Open Market Committee because it confirms already widespread expectations that the Fed will cut interest rates at least several more times in the coming months.

Fed officials are currently grappling with whether to cut interest rates significantly to boost the job market or keep rates higher for longer to fight inflation. Inflation is still running above the Fed’s target of a 2% annual rate.

The report showed “little change in the economy, continued softness in employment, and some limited pressure on prices from tariffs,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary. “Given the FOMC’s recent preoccupation with downside job market risks, it is likely to ignore the temporary inflation threat and trim rates again later this month.”