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Beige Book: Economic activity grew at a 'modest to moderate' rate

Yahoo Finance's Brian Cheung weighs in on the Fed's latest Beige Book report and breaks down what this means for investors.

Video transcript

KARINA MITCHELL: The Fed just out with its latest Beige Book. We'll get right over to Yahoo Finance's Brian Cheung. Brian, what are the key takeaways?

BRIAN CHEUNG: Hey, Karina. Yeah, well, the Beige Book just dropping about seven minutes ago. For those that are unfamiliar, this is essentially a monthly or so-- it's really about six weeks-- update on where economic conditions look across the country by region. So it actually boils down based off of where the 12 Reserve Bank outposts are scattered across the country, what they're seeing in terms of inflation and in terms of employment in those regions.

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And broadly speaking, the Beige Book summary says that economic activity grew at a, quote, "modest to moderate pace," although the pace of growth did slow since the last print on this Beige Book in September. But they did note that consumer spending and manufacturing activity appeared to be up, but noted that significantly elevated prices remain a challenge and noted that in the employment side of things, that there is a lot of high turnover.

Some districts actually noted that despite the expiration of some of those supplemental unemployment insurance benefits and a return to school, apparently, that didn't do much to alleviate workers shortages. And in fact, many employers have had to resort to raising wages to try to find workers, as more than 5 million workers remain out of the labor force compared to pre-pandemic levels.

Some interesting anecdotes within some regions of the country, when you take a look at the Philadelphia Fed, for example, focusing on the labor side of things they noted that one staffing firm actually said it wouldn't accept any new clients that are offering below $15 an hour, apparently not finding that useful in an economy. Obviously, there is going to be different minimum wages depending on what corner of the country you are. But in many cases, it appears that if you are paying below a certain rate, it's not even worth trying to help you find workers.

And Cleveland, for example, they also noted that there's a link between supply chain shortages in addition to labor turnover. In fact, they said one auto dealer in their region said that supply chain disruptions were causing labor challenges, adding, quote, "nothing to sell makes it hard to keep employees."

So, very interesting dynamic at play between those two things. Obviously, all of this weighing on the Federal Reserve's efforts to try to get its dual mandate of price stability and maximum employment at the same time as the Fed heads towards that next policy setting meeting on November 2, November 3. Interesting to see if the Beige Book weighs on the Fed thinking as we get closer to that date, guys.