The U.S. economy expanded modestly from October to mid-November and the outlook for growth was generally positive while labor markets remained tight across the country, the Federal Reserve said in a report on Wednesday.
The latest temperature check of the economy, gathered from the central bank’s discussions with business contacts around the country, also said prices had increased at a modest pace.
“Outlooks generally remained positive with some contacts expecting the current pace of growth to continue into next year,” the Fed said in its “Beige Book” report.
Several Fed districts reported “relatively strong job gains” in professional and technical services as well as in health care. The picture was more mixed for manufacturing, with some districts noting rising headcounts while others said employment remained stable. One district reported layoffs.
Overall, employment continued to rise, even as tight labor markets across the country made it difficult for employers to find the workers they needed. Some contacts said their inability to fill vacancies was constraining business growth.
For example, two employment agencies in the New York district said “almost all job candidates” already are employed and are not interested in changing positions at this time of year.
Agricultural conditions were largely unchanged and remained strained by weather and low crop prices. In the Fed’s Richmond district, farmers have been hesitant to invest in land or equipment.
Parts of the Atlanta district also experienced drought conditions.
The U.S.-China trade war, now in its 16th month, has dragged on economic growth. U.S. manufacturing activity has softened and business investment has cooled as firms delay making decisions due to the uncertainty over tariffs.
Retailers mentioned higher costs, with contacts in some districts attributing the rises to tariffs, the Fed said. Some firms said they were limited in their ability to raise prices, while others were more able to pass on the costs.
Most districts reported stable-to-moderately growing consumer spending, with several districts reporting increases in auto sales and tourism, the Fed said.
However, some areas reported pockets of weakness. Retailers in the St. Louis district said the outlook for future economic conditions had turned pessimistic and that sales have been the same or slightly lower than last year. Attendance at Broadway shows in New York City dropped off during the first half of November and ticket prices were slightly lower than a year ago.
Strong Labor Market
The Fed has cut interest rates three times this year in an effort to protect the economy from the trade dispute with China, slowing global growth and a slump in business investment.
U.S. consumer confidence fell in November for the fourth straight month amid concerns about current business conditions, but the index is still consistent with an economy growing at a moderate pace.
Fed Chair Jerome Powell said on Monday monetary policy is now “well-positioned to support a strong labor market” and help the central bank reach its 2% inflation target, a hint that interest rates are likely to remain steady unless there is a sharp decline in the economic outlook.
Elsewhere in the Beige Book, some districts said the restaurant industry was particularly strained by a shortage of labor. Some restaurants in Southern California had closed because of labor and operating costs. In Minneapolis, some restaurants cut hours due to a lack of staff.
The Beige Book was prepared by the Dallas Fed with information collected on or before November 18.