Economic growth slowed across parts of the U.S. in recent weeks, and some firms have become a bit less optimistic about the future, according to a new report from the Federal Reserve. “A majority of districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few districts,” the Fed said in its latest Beige Book report.
Broadly, the Fed said economic growth was modest in 7 districts, moderate in 4 districts and “flattened out” in the New York Fed district. The prior beige book said activity expanded in all 12 regions with the pace equally split between moderate and modest (“moderate” is stronger than “modest.”)
Looking forward, businesses remained upbeat, though some less so than had been the case earlier in the year. The Philadelphia Fed reported manufacturers continued to expect growth over the next two quarters, but “the breadth of optimism has narrowed” and “expectations for future employment and capital expenditures also softened.” The Dallas Fed said in the energy sector, “outlooks remained positive, although contacts were more guarded in their optimism” than before.
Labor markets across the U.S. “continued to tighten, with most districts citing shortages across a broadening range of occupations and regions,” the Fed said. The national unemployment rate in April fell to 4.4% as hiring picked up from the prior month, according to Labor Department data.
The San Francisco Fed reported that “recent changes in immigration policy created substantial labor supply shortages for low-skilled workers in the agriculture sector; as a consequence, some growers discarded portions of their harvest.”
Even with more firms struggling to find workers, the report said there was “little change to the recent trend of modest to moderate wage growth, ” though some firms raised pay to attract and keep employees. The Chicago Fed reported a “manufacturing firm that was expanding raised wages for unskilled workers 10% and noted a significant improvement in retention and the quality of applicants.”
Inflation remained tame, with most areas “reporting modest increases” in prices, the report said. Prices rose for materials like lumber and steel, while some areas saw falling prices for groceries, clothing and motor vehicles.
The Fed held interest rates near zero for years in the wake of the 2007-09 recession as part of its effort to boost inflation and lower unemployment. Now, with the economy on stronger footing, officials are slowly raising rates and preparing to shrink their $4.5 trillion in holdings of Treasury and mortgage securities.