Fed’s Beige Book Reveals Multiple Economic Concerns: Slowing Hiring, Rising Prices, Cautious Consumers

September 4 — The Federal Reserve’s latest Beige Book, released Wednesday, indicates that businesses remain “reluctant to hire” amid weak sales and trade‐war uncertainties, while tariffs have only “modestly or moderately” intensified inflation to date.

Published eight times annually, the Beige Book aggregates economic observations from the twelve regional Federal Reserve banks. This edition, compiled by the Federal Reserve Bank of Philadelphia, reflects information gathered through August 25.

As Fed officials prepare for their September 16–17 policy meeting, the report serves as a critical input. Market participants widely anticipate a rate cut this month to shore up the labor market, yet the Beige Book’s hiring data have done little to dispel concerns over a slowdown. The survey findings reveal that U.S. economic growth remains below its historical average, with scant evidence of an imminent acceleration.

Although labor‐market conditions have weakened, they have held relatively steady. Firms are increasingly deploying artificial intelligence to assume certain functions and are reducing headcount by leaving vacancies unfilled after resignations or retirements. A decline in immigrant labor—driven by intensified deportation efforts—has further dampened hiring.
Inflation climbed over the summer and is expected to remain elevated, but the report describes price increases as “moderate to modest.” Following several years of elevated inflation, financially stretched households continue to exercise caution in their spending.

Across all Federal Reserve districts, consumer outlays have either stagnated or declined as wage growth fails to keep pace with rising prices amid heightened economic uncertainty and higher tariff rates.

Fed Governor Christopher Waller and his rate‐cut proponents view the surge in tariff‐related inflation as a one‐time shock that will gradually subside next year. They argue that deterioration in the labor market poses a more significant threat to economic stability. Waller is also regarded as a leading candidate to succeed Jerome Powell as Federal Reserve Chair.

The U.S. August nonfarm payroll report, due Friday, September 5, represents the final major labor data release before the upcoming FOMC meeting. According to the CME FedWatch tool, markets currently assign a 96.6% probability to a 25-basis-point rate cut in September, with just a 3.4% chance of no change.

On the same day the Beige Book was published, several Fed officials—including Waller and St. Louis Fed President Musalem—issued warnings about emerging labor‐market risks. Waller cautioned that hiring conditions can deteriorate rapidly and urged preemptive action, while Musalem noted upside risks to labor‐market weakness and downward revisions to inflation concerns.