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Fourth District Beige Book

The Beige Book—officially known as the Summary of Commentary on Current Economic Conditions by Federal Reserve District—is produced eight times each year prior to Federal Open Market Committee (FOMC) meetings. The information in the Beige Book is gathered primarily through interviews with business people in each District, as well as from Federal Reserve Bank and Branch directors. The publication’s original purpose was to supplement official statistics with more current anecdotal accounts of the economic environment in order to assist policymakers during FOMC deliberations.

Summary of Economic Activity

The Fourth District economy continued to expand at a modest, relatively steady pace recently. The growth resulted from continuing strength in a few key sectors and waning drags from manufacturing and freight. As has been the case for several reporting periods, professional and business services firms provided a steady source of support for the broader economy. Construction and real estate activity remained strong, on balance, particularly on the nonresidential side. Meanwhile, consumer spending picked up as the holiday shopping season progressed. Bankers indicated that loan demand was stable on net. Although manufacturing activity did not expand during the reporting period, it did not contract either, as it had for much of 2019 as factories adjusted to weaker global economic growth and trade-related uncertainties. Turning to the outlook, firms remained optimistic about demand for their goods and services in coming months, albeit a little less optimistic than during the prior reporting period. Labor demand remained firm, while wages and selling prices increased at a modest pace.

Employment and Wages

On balance, aggregate employment increased slightly in recent weeks. Professional and business services firms continued to add workers because demand for their services increased from already robust levels. At the same time, construction and real estate firms suggested that labor demand remained solid at a time of year when firms are often experiencing a seasonal slowdown in construction and sales. Reports from manufacturers suggest that payrolls were relatively stable as demand for factory goods was flat. Retailers indicated that seasonal hiring was largely unchanged from a year earlier. Outside of a seasonal pickup in hiring for holiday fulfillment, transportation and freight contacts generally suggested that employment was flat to down in the sector. Some lenders reduced payrolls because overall loan demand was flat and they sought to increase efficiencies. Looking forward, firms were more bullish about their near-term hiring expectations than they were during the prior reporting period.

Wages increased at a modest pace, on net, similar to that of the prior reporting period. Firms across most industry segments reported that wages were increasing, particularly in geographies and occupations where competition for workers was significant. A few firms reported paying higher yearend bonuses, and one implemented a new profit-sharing plan to help retain workers.


On average, selling prices in the District rose modestly in recent weeks. Output price increases were most often reported by contacts in the retail, professional and business services, and construction industries because of persistent strength in demand. By contrast, manufacturers indicated that output prices continued to move lower, although at a slower pace, while a downward trend in freight prices paused recently. Nonlabor input costs increased at a slightly faster pace in recent weeks. Retailers said that tariffs continued to put upward pressure on costs, as did increases in some commodity prices. Higher food prices were reported by a few restauranteurs. Freight contacts noted materially higher (nonhealthcare) insurance costs because insurance claims against trucking companies have increased dramatically while insurance capacity has dwindled. Manufacturers indicated that, on balance, materials costs have stabilized after trending lower in earlier months. Meanwhile, reports from professional and business services firms suggest that upward (nonlabor) cost pressures may have eased somewhat.

Consumer Spending

Consumer spending increased solidly; retailers reported significant sales gains that exceeded the typical holiday season pickup. One large department store contact said that Black Friday turnout lifted November sales to "abnormally strong" levels. Furthermore, auto retailers reported that new-vehicle sales were up 10 percent from a year earlier, boosted by manufacturers' incentives and strong performance of the stock market. Most retailers expected sales to slow back to normal levels heading into the first quarter of 2020. A hospitality contact indicated that investment in local construction projects had boosted demand for hotel rooms in his region.


The overall level of manufacturing activity did not change meaningfully, but individual firms' reports varied considerably. Several contacts indicated that demand increased as the year drew to a close. Moreover, they seemed optimistic about the near-term outlook for demand and planned their capital expenditures accordingly. Meanwhile, others noted that ongoing trade-related uncertainty, weak industrial activity, and a typical seasonal slowdown constrained demand. These manufacturers indicated that their backlogs were soft, and they relayed reports that their customers did not expect that demand would soon return to levels seen in recent years. To cope with weaker demand, these manufacturers were watching spending carefully, resulting in less ambitious capital spending plans, reduced hours for workers, and less use of workers from temporary help agencies.

Real Estate and Construction

Overall construction and real estate activity edged up in recent weeks in spite of a typical seasonal slowdown in some segments. This seasonal slowdown was particularly notable on the residential side where both homebuilders and residential real estate contacts indicated that cold weather and the holidays combined to slow activity as 2019 drew to a close. However, one residential broker indicated that while sales activity slowed from two months earlier, it remained more robust than during the same period a year earlier.

By contrast, nonresidential builders and real estate firms indicated that demand remained very firm in spite of the expected seasonal slowdown. One contractor summarized the sentiment in the industry by stating that "times are good and people are building." On the commercial real estate side, one contact indicated that growth in some of his economically vibrant markets was being augmented by emerging growth in one of his lagging metro markets. Another said that rising costs for new construction helped boost leasing activity because tenants sought lower-cost alternatives to new construction. On balance, nonresidential construction and real estate activity was expected to remain robust into 2020.

Financial Services

Reports from bankers were mixed but generally pointed to flat loan demand. Lower interest rates spurred an uptick in auto loan demand and home mortgage activity. However, that growth was offset by weaker demand for business loans. Bankers expected that the first quarter of 2020 would remain soft, citing the usual seasonal factors. Most bankers indicated that core deposits increased, but several noted that this was typical at the end of the calendar year.

Professional and Business Services

Activity in the professional and business services sector held steady at robust levels since the previous report. Most industry contacts indicated there had been no recent changes in their activity levels, although a consulting firm in the online commerce industry reported a significant improvement in business conditions over the holiday period. A wealth advisor noted a slight increase in activity in recent months and identified his clients' confidence in the economic outlook for 2020 as the driving factor. Overall, the majority of contacts in professional and business services expected favorable conditions to persist into the first quarter of 2020.


Reports from the transportation sector remained mixed but generally pointed to a slower contraction in freight volumes. Contacts commonly indicated that overall freight volumes remained lower in most industries and noted that the fall shipping season as a whole was softer than normal. Freight executives cited low commodity prices and tariffs on imported goods from China as factors contributing to the ongoing weakness. Several freight firms reported increases in their freight volumes since the previous report. However, these companies cited improved internal management and advertising as the drivers of the gains rather than a broader strengthening in demand. Expectations for future freight activity remained soft.