The Latest on Today’s Economy (for the Non-Economist)

Peter Weddle

With thanks to Bruce Steinberg and Steinberg Employment Research

The following excerpts of state-by-state business activity were drawn from the July 2020 Federal Reserve Board’s Beige Book. It’s written in English, not econo-babble, so offers an approachable summary of the state of the U.S. economy. Not surprisingly, results were mixed across industries and locations, with the reemergence of Covid-19 reversing earlier progress in some areas especially in southern and western states. Overall, hiring expanded slowly as many firms were cautious about bringing back furloughed or laid-off employees too quickly.

First District — Boston (CT, MA, ME, NH, RI & VT)

Economic activity picked up somewhat in the second half of May and June, according to First District business contacts, but largely remained well below year-earlier levels. Retailers reported increased sales in June, with some online purchases exceeding June 2019. Tourism contacts cited much-improved summer bookings in coastal areas compared with cancellations in April and May. Manufacturing results were mixed, but most reported rising revenues. Software and information technology services firms said their businesses were holding steady, with declines in new orders but continuing strength from existing customers.

Second District — New York (CT, NJ & NY)

The Second District economy rebounded moderately in the latest reporting period, following a steep contraction, as the spread of the virus subsided and businesses began to reopen. Employment came off its lows across most industry sectors, while wages were steady, on balance…. Business contacts have grown considerably more optimistic about the near-term outlook, though many businesses expressed concern about PPP loans running out or not being forgiven. Consumer spending has been mixed, but, on balance, has rebounded substantially — especially for vehicles. In contrast, tourism and travel have remained depressed.

Third District — Philadelphia (DE, PA & NJ)

Third District business activity expanded moderately during the current Beige Book period but remained far below levels observed prior to the onset of the COVID-19 pandemic. Business operations resumed or increased, as lower COVID-19 caseloads prompted states to phase out stay-at-home orders and mandated closures. As firms recalled some of their workforce, net employment also grew moderately; however, firms continued to issue permanent layoffs as well. More firms have noted salary reductions than increases. Meanwhile, contacts noted difficulties attracting workers despite high unemployment rates.

Fourth District — Cleveland (KY, OH, PA & WV)

After declining sharply in March and April, the Fourth District economy expanded in recent weeks as some firms resumed business operations. Contacts across most industry segments reported a rebound in activity during the early phases of reopening, although many suggested that the pace of improvement slowed as the reopening progressed. Most were also careful to point out that demand remained well below pre-pandemic levels despite the recent gains. Looking forward, contacts generally expected activity to pick up further in coming months. However, some questioned the sustainability of the pace of recovery amid a spike in new COVID cases across the country along with weak new orders and declining backlogs in some key industries. That uncertainty likely contributed to softness in capital spending and hiring plans. More than 40 percent of contacts cut capital spending plans since the last report, while less than 10 percent planned to spend more. Contacts across a wide array of industries indicated they were bringing idled workers back only slowly, and are unlikely to rehire all of them in the near term.

Fifth District — Richmond (MD, NC, SC, VA & WV)

The Fifth District economy grew compared to our prior report, although economic activity generally remained well below pre-COVID-19 levels. Manufacturers experienced a slight uptick in new orders but shipments of finished goods were little changed. … Trucking companies, on the other hand, indicated a modest increase in demand as the reopening of stores and restaurants spurred new shipments. Retail shopping picked up modestly as more stores were able to reopen, but sales remained below year-ago levels. Leisure travel and tourism activity increased moderately, particularly at drivable locations. Business travel, in contrast, remained depressed. … On balance, demand for nonfinancial services declined moderately. Employment rose moderately in recent weeks as many firms called back previously furloughed or laid-off workers; however, total employment remained well below pre-pandemic levels.

Sixth District — Atlanta (AL, FL, GA, LA, MS & TN)

On balance, economic activity in the Sixth District remained weak from mid-May through June. Labor markets improved somewhat as businesses in parts of the region reopened. Nonlabor costs remained subdued. … Manufacturing activity declined, and reports on new orders were mixed.

Seventh District — Chicago (IA, IL, IN, MI & WI)

Economic activity in the Seventh District increased strongly in late May and June, but remained well below its pre-pandemic level. Contacts expected further growth in activity in the coming months, but most did not expect a full recovery until at least the second half of 2021. Employment, consumer spending, and manufacturing increased substantially, while business spending and construction and real estate activity increased modestly. Wages edged up, prices declined slightly, and financial conditions deteriorated modestly.

Eighth District — St. Louis (AR, KY, IL, IN, MO, MS & TN)

Economic activity has rebounded sharply since late May; however, overall conditions remain significantly depressed and the pace of recovery appears to have slowed since mid-June. Contacts reported reopening and bringing back furloughed workers, but the pace has been uneven across firms and sectors. General retailers, auto dealers, and hospitality contacts report increases in business activity, while manufacturing contacts reported little change.

Ninth District — Minneapolis (MI, MN, MT, ND, SD & WI)

Ninth District economic activity was mixed since the previous report, with declines in most sectors, despite some improvements due to emergency federal stimulus and gradual reopening of state economies in the District. Employment rose from very contracted levels, wage pressures were flat, and price pressures remained minimal. The District economy saw growth in consumer spending and tourism, but decline in services, construction and real estate, manufacturing, energy, and mining; agricultural conditions remained poor.

Tenth District — Kansas City (CO, NM, MO, NE, OK & WY)

After a sharp contraction in previous months, Tenth District economic activity rebounded slightly in June. Expectations also improved, and contacts in most sectors anticipated higher levels of activity in the months ahead. … Manufacturing activity expanded slightly, driven by gains at non-durable goods plants. …. Professional and high-tech services contacts continued to report lower sales, and additional declines were anticipated in the months ahead…. District employment started to recover, with the most significant gains in the retail, restaurant and tourism sectors. Despite recent improvement, employment still remained well below year-ago levels in several sectors. Wages rose modestly, and prices increased across most District sectors.

Eleventh District — Dallas (LA, NM & TX)

The Eleventh District economy regained its footing following unprecedented declines in the previous two reporting periods. Activity in the manufacturing and service sectors began rebounding, as did retail spending. However, the level of output and demand remained below pre-COVID levels. … Employment stabilized, according to contacts, but overall labor market conditions remained weak. Wages were flat to slightly up. … Outlooks improved, but a weak economy, depressed activity in the energy sector, the resurgence of COVID-19 infections, and a pause in the reopening of the district economy were causing concern among contacts.

Twelfth District — San Francisco (AK, AZ, CA, HI, ID, NV, OR, UT, & WA)

Economic activity in the Twelfth District contracted modestly on balance during the reporting period of mid-May through June. Employment levels increased slightly, as rehiring activity proceeded cautiously. Wages were generally stable, as were prices. Sales of retail goods rose moderately, while activity for providers of consumer and business services continued to contract sharply. Manufacturing activity was mixed, and conditions in the agriculture sector remained weak.

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