economy

The U.S. economy has entered a state of unusual calm in recent weeks. According to the latest Beige Book report from the Federal Reserve, business activity across all 12 districts remained mostly unchanged, while consumer spending has started to decline—especially among low- and middle-income households.
While wealthy consumers continue to spend as if nothing’s wrong, the rest of the population is tightening their belts. This growing economic divide is now reflected even within the Fed itself.

Fed in the Dark: Conflicting Forecasts and Missing Data
Due to the recent government shutdown, the Fed is heading into its key December meeting without updated data on employment and inflation. Policymakers are, in essence, making decisions "blindfolded." Some are pushing to cut interest rates, while others prefer to hold steady.
Markets now estimate an 80% chance of a rate cut, following public signals from several of Fed Chair Jerome Powell’s close allies suggesting support for monetary easing.

Hiring Slows as Labor Costs Rise
Across the U.S., companies are not resorting to mass layoffs but are implementing hiring freezes instead. Many are managing costs by allowing natural attrition, such as retirements, to reduce their workforce.
However, finding skilled workers remains a challenge. Philadelphia reports rising wages due to fierce competition for a shrinking labor pool, while New York struggles to find qualified AI professionals.

The Wealthy Keep Spending, Everyone Else Cuts Back
Affluent consumers continue to spend, propping up parts of the economy, while others are cutting back sharply. In some regions, people are skipping restaurant visits, limiting clothing purchases, or forgoing personal care services.
In St. Louis, for example, regular diners now visit two or three times a week instead of daily. In San Francisco, lower-income households are slashing spending on healthcare and food, even as the wealthy keep shopping.

What’s Next? Uncertainty and Cautious Optimism
Businesses remain cautious and prefer to wait and see. Cleveland described the mood as a “collective holding of breath,” while Richmond reported such low consumer confidence that expensive purchases are being postponed.
Demand is rising in specific sectors—like AI-powered data center construction—but overall, concerns about the near future persist.
Both the Fed and the broader market stand at a crossroads. The key question: Can policymakers balance restraint with the need to support an economy where inequality is becoming more painful than inflation?

#economy , #usa , #interestrates , #Fed , #fomc

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