WASHINGTON, Sept. 8 (Reuters) – The US economy “shrank slightly” in August as the new wave of coronavirus hit restaurants, travel and tourism, the Federal Reserve reported on Wednesday, but the economy in its together remained in the grip of a post-pandemic rush of rising prices, labor shortages and hiring on stilts.
“The deceleration in economic activity was largely attributable to a decline in dining, travel and tourism in most districts, reflecting security concerns due to the rise of the Delta variant and, in a few cases, to international travel restrictions, ”the Fed said. reported in his latest collection Beige Book of anecdotal information on the economy.
Yet the document, summarizing information gathered through August 30 that will be part of the deliberations of the Fed’s September 21-22 policy meeting, points to continued strong demand for workers and hires made more difficult by “increased turnover, early retirements, childcare needs, challenges in negotiating job offers and improved unemployment benefits. Some districts have noted that return-to-work schedules have increased. been postponed due to the increase in the Delta variant. “
Job postings were so plentiful, the Atlanta Fed noted, that restaurants were plagued by “freewheeling ghosts,” where employees take jobs for a few days, then quit without notice and dine out. following.
Prices, Fed officials reported, continued to rise.
“Inflation would have been stable at a high rate,” with Fed districts saying it was moderate or high, with the costs of metals, freight, building materials and other industrial commodities rising in the most districts.
“With widespread resource shortages, pressures on input prices have continued to be pervasive,” the Fed reported, causing headaches in industries as disparate as beer brewing and bridal wear.
“A contact reported reimbursing several nuptials because the dresses didn’t arrive in time for the weddings,” the Richmond Fed reported. In the St. Louis Fed district, “a regional brewery reported that its supplier had increased prices twice between ordering and delivery of an aluminum pallet.”
The report describes a difficult landscape for the US economy and the Fed as a fall season was approaching where it was hoped that the recovery from the pandemic would take a clearer form.
The risks of sustained price increases remain real, rather than fading as quickly as Fed officials had hoped.
On the other hand, “all districts continued to report an increase in employment overall,” perhaps alleviating concerns that weak employment growth of just 235,000 new positions in August was the edge of a wider employment slowdown given the spread of the Delta coronavirus variant. Analysts expected more than 700,000 new jobs last month.
EXPECTING MORE CLARITY ON JOBS
Fed officials are wondering when to cut their $ 120 billion in monthly bond purchases as the first step in an upcoming shift to post-pandemic monetary policy, and while a decision remains likely this year, the August’s job reading might require further confirmation that hiring will remain on track.
“The Delta variant weighs on consumer spending and jobs, and the pace of growth appears to be slowing,” New York Fed Chairman John Williams said on Wednesday.
“I will want to see more improvements” in the job market before I decide the economy is ready for the Fed to cut one of its signature pandemic programs, Williams said.
“It might be appropriate to start reducing the pace of asset purchases this year,” Williams said, but concluded “it is clear that the pandemic is far from over, both in terms of its effects on health and its effects on the economy “.
New data released on Wednesday showed the strength that had developed in the labor market throughout the summer, with a record 10.9 million job openings in July. This has eclipsed the number of unemployed people and left some officials confident that hiring will remain strong and allow the Fed to begin its bond “taper” soon. Read more
“There is a lot of demand for workers and there are more vacancies than there are unemployed,” said Federal Reserve Chairman of St. Louis, James Bullard, in an interview published in Tuesday. the Financial Times.
Reports from the Fed’s districts indicated that the slowdown in job creation in August was perhaps more due to the difficulty of matching workers to positions at a salary they would accept rather than downward. demand for new employees.
“Employment grew sharply, but hiring demand continued to far outstrip workforce response,” the Minneapolis Fed reported. “Montana’s workforce development professionals have also highlighted affordability of housing and child care as major challenges facing job seekers. Exposure to COVID-19 remained a major concern among workers and job seekers.
Even though the consumer and business service sectors “have deteriorated somewhat,” the San Francisco Fed reported, “labor shortages have significantly reduced capacity at some hotels, airlines and restaurants, a Mountain West hotel having to close several floors due to a lack of housekeeping staff. “
Reporting by Howard Schneider and Ann Saphir; Additional reporting by Lindsay Dunsmuir; Editing by Andrea Ricci
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