Fed Survey Reports Widespread Uncertainty About U.S. Economic Future
A recent Federal Reserve report, known as the Beige Book, found that while economic activity was on the rise in August 2020, there is widespread uncertainty about the economic future of the United States in the wake of the coronavirus pandemic. The report is compiled from responses from businesses contacted by the Fed’s regional banks, which are designed to help Fed policymakers set interest-rate policies later this month.
At its July meeting, the Fed promised to keep rates low until central bank officials are “confident that the economy has weathered recent events,” according to a Chicago Tribune story on the report.
The report found that consumer spending, which accounts for about 70 percent of economic activity, had increased primarily in auto, retail, and tourism sales. Other modes of consumer spending, however, slowed down considerably. Though the Fed report did not make the link, the $600 weekly increase in unemployment payments expired at the end of July.
The report saw “rising instances of furloughed workers being laid off permanently as demand remained soft.” Wages have also become flat, as many companies rolled back increases that were linked to high-exposure jobs or hazard pay at the beginning of the pandemic.
Though Americans are still out of work, the Fed report found that firms that are hiring are having difficulty filling positions. This is largely due to the uncertainty surrounding the coming school year and the nearly unattainable access to day care.
Residential construction activity, however, was a bright spot in the report, as increases in home sales and home prices reflect the rise in housing demand. Manufacturing has also increased in most of the Fed’s districts.