Forex – U.S. economic activity expanded more slowly from mid-July to late August and businesses reportedly hired less.
The report, known as the “Beige Book” and prepared through surveys conducted with business representatives in 12 central bank regions until August 26, revealed that US bosses are being more selective about who they will hire due to the ongoing concerns about the “uncertain” economic outlook.
“Employers have become more selective about who they hire and are less likely to expand their workforces due to concerns about demand and an uncertain economic outlook. As a result, candidates face increased challenges and longer deadlines to secure a job,” the Beige Book report said.
The report underscored growing weakness in the U.S. labor market ahead of a rate decision later this month, when Fed policymakers are expected to begin cutting interest rates from their highest levels in two decades. The Fed, which has a dual mandate from Congress to tackle both inflation and the labor market, has said recently that its twin goals are now more appropriately balanced as inflation slows and unemployment rises.
In the Beige Book, the Fed said economic activity grew “slightly” in three of its 12 regions, while noting that the number of regions reporting “flat or declining activity” had increased. While overall employment levels remained steady, “there were isolated reports of firms filling only essential positions, reducing hours and shifts, or reducing overall employment levels through attrition.” At the same time, price growth remained “modest” in its steadiness and consumer spending fell slowly in many regions.
On the inflation side of its mission, the Fed said prices were rising “modestly” even as it saw easing cost pressures for food, lumber and concrete in some areas.
The slight pullback in the labor market and moderate price pressures should increase calls for the Fed to cut interest rates on Sept. 18. Futures market participants see a smaller, quarter-point cut as the most likely scenario, while they are not ruling out a larger half-point cut, according to CME Group data.
