On June 4 local time, the Federal Reserve released the latest national economic conditions survey report—commonly known as the 'Beige Book'. The report is like a bombshell, revealing that the U.S. economy is experiencing a worrying downturn: economic activity has slightly contracted, the job market has clearly cooled, and tariff issues have become the 'eye of the storm' impacting the economy.
Overall, since the last Beige Book was published on April 23, the U.S. economy has not shown significant signs of recovery. The report shows that economic activity has substantially declined in regions such as Boston, New York, and Philadelphia; although regions like Richmond, Atlanta, and Chicago have seen slight growth, it is insufficient to offset the downward pressure nationwide. More critically, regions generally reflect that economic and policy uncertainty has significantly increased, making businesses and households increasingly cautious and hesitant in their decision-making.
The job market is also showing red flags. In the 12 Federal Reserve districts, recruitment activities have stagnated in most areas, with 7 districts even describing the employment situation as 'flat'. The report also points out that the demand for labor from businesses is declining, with both working hours and overtime opportunities shrinking, and some regions have initiated hiring freezes or even layoff plans. Although layoffs have not yet spread broadly, the phenomenon of 'increasing job seekers and decreasing turnover rates' indicates that competition in the labor market is becoming increasingly fierce, and job opportunities are gradually tightening.
The risks regarding inflation are also intensifying. Although the current price level is described as 'rising moderately', businesses in multiple regions expect costs to rise at a faster pace in the future. More concerning is that many companies have used terms like 'strong', 'significant', or even 'substantial' to describe future cost pressures. The 'culprit' behind this is the recently re-escalated tariff policies. The report clearly states that all regions have reported tariffs pushing up production and operating costs. To cope with rising costs, businesses are considering adopting different strategies: some are prepared to compress profit margins, while others plan to pass on costs through temporary surcharges. Many businesses will make adjustments in the next three months.
It is noteworthy that this report coincides with a sensitive moment of tariff policy adjustments by the Trump administration. Although Wall Street briefly rebounded optimistically after mutual tariff hikes between China and the United States in early May, holding a delusion that 'the impact of tariffs is limited'. However, from the details of the Beige Book, this optimism is being shattered by reality. The term 'tariff' was mentioned 122 times in this report, far exceeding the 107 mentions in April, indicating that tariffs have become an unavoidable economic focus and potential risk source.
The Federal Reserve will hold its next FOMC interest rate meeting from June 17 to 18, and this Beige Book will undoubtedly become an important basis for policy formulation. Against the backdrop of economic slowdown, employment pressure, and inflation fluctuations, the market is highly focused on whether the Federal Reserve will maintain the existing policy framework or introduce new measures to stabilize the situation. No matter what choice the Federal Reserve makes, it will have a profound impact on the global economic landscape, and global markets are holding their breath in anticipation.