Economy Still Far below Levels Prior to the COVID-19 Pandemic

Mish

The Fed's Beige Book tells us what we already know. The rebound has been weak and choppy.

The Beige Book is a Federal Reserve System publication about current  economic conditions across the 12 Federal Reserve Districts. 

National Highlights

  • Economic activity increased among most Districts, but gains were generally modest and activity remained well below  levels prior to the COVID-19 pandemic. 
  • Consumer spending continued to pick up, sparked by strong vehicle sales and some improvements in tourism and retail sectors. But many Districts noted a slowing pace of growth in these areas, and total spending was still far below pre-pandemic levels. 
  • Commercial construction was down widely, and commercial real estate remained in contraction. 
  • Residential construction was a bright spot, showing growth and resilience in many Districts. Residential real estate sales were also notably higher, with prices continuing to rise along with demand and a shortage of inventory. 
  • Overall loan demand increased slightly, led by solid residential mortgage activity. 
  • Agricultural conditions continued to suffer from low prices, and energy activity was subdued at low levels, with little expectation of near-term improvement for either sector. 
  • Employment increased overall among Districts, with gains in manufacturing cited most often. However, some Districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft. 
  • Wages were flat to slightly higher in most Districts, with greater pressure cited among lower-paying positions. Some firms also rescinded previous pay cuts. Others, however, have looked to roll back hazard pay for high-exposure jobs, though some have chosen not to do so for staff morale and recruitment purposes. 

Repeat Themes

The 32-page Beige Book mostly repeats those themes across each of the Fed's 12 regions with some variances. 

The reports are little more than the regional reports that come out through the month: Philly Fed Report, Dallas Fed Report, Empire State Manufacturing Report, etc. 

Basically is a compilation of what we already know plus some service sector anecdotes.

Conditions Mirror the Obvious

Conditions mirror the obvious problems and the one known major plus, residential real estate. 

Housing is fueled by cheap money from the Fed even as most of the rest of the economy suffers from weak and choppy growth.

Note that The Fed Now Owns Nearly One Third of All US Mortgages

Mish

Comments (15)
No. 1-8
Tony Bennett
Tony Bennett

"Consumer spending continued to pick up, sparked by strong vehicle sales and some improvements in tourism and retail sectors."

...

Setting aside some crazy incentives on new vehicle sales ... consumer spending driven by stimulus (and forbearance / rent moratorium) ... BUT delving a bit deeper my guess is that stimulus was spent - not saved - in expectation of more stimulus.

When did the House pass their $3 trillion package? May? It included another big round of checks to all households + $600 / week till next year for those on UE. A few months back felt like slam dunk passage. Now? How many regret blowing it all - rather than saving some - assuming gravy train would keep rolling?

Put me down for "experts" being surprised at economy slowing quicker than expected before year's end (especially with moratorium / forbearance fading) as I think next stimulus nowhere near as robust as last.

Tony Bennett
Tony Bennett

"and the one known major plus, residential real estate. "

...

the flip side - which they don't like to talk about - cratering of urban rental market.

PecuniaNonOlet
PecuniaNonOlet

61 days till election.

anoop
anoop

does this mean that stocks will need to be pumped up even more?

Herkie
Herkie

One need only look at the empty shelves and freezers at Walmart to know the economy is functioning far below where it was in January. When it was fully functional those shelves were full. If they are NOT full that means the single most common shoppers cannot buy what they went to the market to buy.

By the way, I bought a crockpot today, I have been looking for one since I moved in March. There were two on the shelf. Now one.

Rbm
Rbm

Had some funds lined up in the tech industry. Should have bought when when the market was down 35 percent. Thinking it was gonna drop some more i held off. Now every day when the new high price trigger goes off on my phone. I feel like im getting kicked in the balls.

channelstuffing
channelstuffing

Biden win stimulus for Main Street,Trump win more stimulus for WS!

Realist
Realist

The US economy will continue to struggle until the pandemic is under control.

And the US, under Trump, does not have a plan to get it under control.

I expect a surge in cases later this month as schools reopen, and many Americans get duped into believing that the pandemic is over, as the administration does its best to promote this narrative.

Never mind that over 2.5 million Americans are currently infected and 40000 more are added every day.

Never mind that over 185 thousand have died and 1000 more are added each day.

Unemployment will remain high. Businesses will keep failing. Deficits will continue to skyrocket as the administration tries to spend its way to prosperity, instead of focusing on the biggest problem; the pandemic. This may help the stock market, but it won't help the unemployed get work.