The Fed’s Beige Book: Labor shortages and supply chain bottlenecks are curbing economic growth

The Fed released the latest issue of “Comments on the Current Economic Situation” (the “Beige Book”) on Wednesday, pointing out that the US economy is still growing steadily, but labor shortages and supply chain bottlenecks are curbing growth and pushing up inflation.

The Beige Book pointed out that although labor growth is limited by the shortage of workers, the number of employed people has increased. Most regions report “substantial price increases”, some regions expect prices to continue to remain high, while others expect price growth to slow.

The Beige Book is an overview of the U.S. economic situation by the Federal Reserve, based on 12 local Federal Reserves’ surveys of current economic conditions. It is published 8 times a year, usually two weeks before the interest rate meeting.

The New York Fed stated that economic growth in the region has slowed to a moderate pace in recent weeks due to supply disruptions and labor shortages hindering economic activity.

The latest Beige Book mentions a labor shortage 26 times, compared to only 6 times in January. In addition, the report also mentioned supply chain issues 37 times, compared to only 9 times in January.

The Philadelphia Fed pointed out that concerns and uncertainties about the Delta variant strain continue to drag down growth, but respondents are most worried about continued labor shortages and supply chain disruptions.

Although the shortage has restricted economic growth, the report found that the economy is still expanding steadily, and most companies are “cautiously optimistic” that the situation will improve in the coming months.

Federal Reserve officials have stated that they will reduce the $120 billion monthly bond purchase plan as early as next month. Previously, most policymakers believed that the labor market had improved substantially since the end of last year, despite unexpected employment growth in August and September. Weak.

In the past few months, the inflation rate in the United States has been well above the Fed’s 2% target level. Policymakers are paying close attention to the factors driving up prices and whether inflation will fall back next year as most people expected.

If not, several policymakers have recently stated that the Fed may need to start raising interest rates sooner than generally believed.