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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's economy grew modestly and at a pace similar to that of the previous reporting period. However, sales and activity generally remained below pre-pandemic levels across most sectors. Staff levels changed very little in all sectors, even as business activity continued to increase. Consequently, wages were mostly steady. Input cost pressures increased somewhat as prices for construction materials, metals, and materials used in pandemic-related medical equipment rose. Selling prices rose moderately as some of those costs were passed through to customers. Moreover, strong demand and low inventories helped to push up prices for vehicles and homes. Looking ahead, contacts expected moderate improvement in customer demand, although expectations have been scaled back since the previous reporting period because of the uncertainty of the coronavirus's path. Contacts expected to add staff slowly in the months ahead, and the majority of firms believed that by next spring, their staff levels would still be below pre-pandemic levels.

Employment and Wages

Labor demand remained weak, and staff levels changed by little in all sectors, even as business activity increased. Fewer firms reduced staff levels in the past two months than in the previous period. However, only about one-fourth of contacts added workers, a share which was unchanged from the previous period. Firms noted that the weak level of customer demand was the primary reason for their lackluster hiring activity. Although the labor market is more stable than it was during the spring, a few firms reported that previously furloughed workers have recently been laid off permanently—a sign that the labor market's recovery may not be smooth. Contacts expected to add staff slowly, and the majority of firms believed that by next spring their staff levels would still be below pre-pandemic levels. Most believed customer demand would not be strong enough to support pre-pandemic staff levels, but a sizeable minority noted their firms had become more efficient and did not need as many workers as they had at the beginning of the year.

Wages were mostly steady, with 8 out of 10 firms reporting no change in the past two months and with fewer firms cutting pay. Where pay increases were noted, a number of staffing agencies reported that before enhanced unemployment benefits had expired, the benefits motivated them to raise wages to attract workers. Also, a few firms reported that professional staff whose wages had been previously cut have had those wages restored.


Nonlabor costs rose modestly after they had been flat or slightly lower in the prior two reporting periods. Construction firms widely reported that shortages of materials had caused input costs to rise. This was especially true of lumber. Manufacturers noted that prices rose for materials that were in limited supply and were also used for medical equipment, such as plastics or materials used in masks. Price increases for certain metals such as zinc, copper, and aluminum were also reported. Multiple firms in construction, manufacturing, and retail reported higher operating costs because of increased expenditures for personal protective equipment, extra sanitation measures brought about by COVID-19, and, in some cases, staggered shifts.

Selling prices rose modestly, although there was variation across sectors. Most firms held their prices unchanged because of weak demand. Among sectors in which price increases were noted, higher materials costs boosted new-home prices. Auto dealers commented that low inventories of vehicles were pushing up prices for new and used cars. Further, transportation firms noted that increased cargo volumes gave them enough pricing power to raise their prices.

Consumer Spending

Most retailers reported an increase in consumer spending since the last report. However, demand remained below its pre-pandemic level, and sales growth lost momentum in July. Auto dealers indicated that sales had increased significantly in June, although some momentum was lost in July because of unusually low inventories caused by factory shutdowns in the spring. Similarly, one large department store reported that sales plateaued in July. Furthermore, an apparel retailer commented that it did not see the usual boost to sales during the back-to-school season because many schools were planning to go virtual. Most restauranteurs reported that carryout and delivery orders continued to be strong, but the number of dine-in customers remained very low. Hoteliers noted there was some improvement in occupancy relative to that of a few months ago, but the lack of business travel and group events were major drags on the sector's recovery. Looking ahead, contacts expressed uncertainty regarding the outlook for consumer spending, citing the path of the virus, future of fiscal stimulus, and reopening of schools as major unknowns.


Manufacturing activity improved slightly, although there was variation in performance and production remains below pre-pandemic levels. Steelmakers saw a boost to sales from the growth in auto production and from customers who were making purchases that had been delayed. Food and beverage producers also noted growth, thanks to continued growth in consumer spending. Also, strength in residential construction boosted demand for electrical equipment used in homes. However, demand in the aerospace sector continued to decline, as air travel remains weak. Moreover, a sizeable share of producers that serve a range of markets reported that uncertainty about the economic outlook had caused their customers to either reduce or delay their orders for capital goods. On balance, contacts expect demand to improve slowly over the next few months, although expectations have been scaled back since the previous period.

Real Estate and Construction

Homebuilders and realtors widely reported that activity in the housing market continued to be strong. According to contacts, low mortgage rates and tight inventories of homes spurred home sales by creating a sense of urgency among homebuyers. Realtors noted that the low level of housing inventory also helped to boost prices. Renovation activity was reportedly strong as more homeowners expect to work from home for an extended time. Residential builders and real estate agents expect activity to remain at its current high levels in the near term.

By contrast, nonresidential real estate activity weakened. Builders reported diminished backlogs of new public projects, a situation which they believed could be a result of constrained government budgets. Demand for private-sector projects was reportedly flat, and contacts expect little improvement given the economy's uncertain path. Moreover, commercial real estate developers expressed concern that a rising number of mall tenants could be insolvent if economic conditions do not improve soon.

Financial Services

Banking activity softened during the reporting period. Contacts noted that demand for business loans declined as the Paycheck Protection Program wound down. This decrease was partially mitigated by strong demand for purchase mortgages, mortgage refinancing, and auto loans. Delinquency rates of commercial and consumer loans remained relatively low because of forbearance agreements and various fiscal relief measures. However, if the economy remains weak, most contacts expect delinquencies to rise as consumer and commercial deferral programs end. Bankers were uncertain about the future, particularly because of the lack of clarity about future government stimulus and the path of the coronavirus.

Professional and Business Services

Most professional services firms reported stronger business activity. IT firms experienced strong demand as firms adapted to a virtual work environment. Demand for payroll processing increased as more businesses reopened, and the continued shift toward online purchases heightened demand for transaction authentication services. An accountancy firm with a national footprint noted that deal flow had improved. Similarly, a large consultancy reported some clients restarted longer-term projects that were previously put on hold. Contacts expect demand to remain on a positive trajectory.


Demand for freight services grew moderately, thanks to improved manufacturing production and continued growth of consumer spending. A number of contacts reported that ongoing shortages of trucks made it difficult to meet customer demand. Moreover, the variation of businesses' reopening across states made it difficult to anticipate where trucks are needed. Contacts expect demand for transportation service to remain stable in the coming months.