Fed’s beige book: economy grew at a modest pace to close 2021

The U.S. economy grew at a modest pace in the final weeks of 2021, with persistent supply chain problems and a shortage of available workers hampering production, the Federal Reserve said on Wednesday.

But demand remained strong and consumer spending increased, ahead of an increase in Covid-19 cases caused by the Omicron variant, the Fed said in its periodic collection of nationwide business anecdotes known as Beige Book.

The report contains information collected up to January 3 as new reported cases of the disease increased sharply. In the week that followed, cases continued to rise rapidly, which could dampen economic activity.

Retailers, restaurants and hotels said business picked up in the fall but suffered towards the end of the year as the number of cases began to rise. Ridership of the New York subway, for example, which had increased in November, fell in December as more people stayed at home.

Employers said they continued to fight to fill vacant positions, maintaining the payroll and increasing wages. Respondents in the New York City area expected wage increases of an average of 6% in 2022.

A Dallas-area manufacturer said it takes three to five new hires to fill a vacancy due to rapid turnover in the workforce.

During a confirmation hearing for his second term as Chairman of the Federal Reserve, Jerome Powell said the central bank would use its tools to curb inflation. Photo: Graeme Jennings / Pool Press

The companies also said they were expanding benefits and offering part-time work options to attract applicants.

In some cases, companies have said that they have started automating certain tasks or have implemented changes such as less frequent replenishment of towels in hotels to save on manpower.

Prices continued to rise, the report said, although some companies said the pace of increases had slowed. Transportation bottlenecks have also eased slightly in recent weeks, respondents said.

In the Chicago area, trade contacts “noted that the prices of certain inputs, in particular for energy and certain steel products, had stabilized after very sharp increases at the start of the year.”

Write to David Harrison at [email protected]

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